LOCAL GOVERNMENT BILL

HC Deb 12 November 1973 vol 864 cc35-159

Order for Second Reading read.

Mr. Speaker

Before calling the right hon. and learned Gentleman the Secretary of State for the Environment to move the motion for Second Reading, I have to inform the House that I have selected the amendment standing in the name of the Leader of the Opposition and the names of his right hon. and hon. Friends.

3.45 p.m.

The Secretary of State for the Environment (Mr. Geoffrey Rippon)

I beg to move, That the Bill be now read a Second time.

The massive reorganisation of local government which was contained in the Local Government Act 1972 is now being put into practice. This Bill is a necessary adjunct to that process. As the Green Paper "The Future Shape of Local Government Finance", Command 4741, explained, reorganisation created the opportunity, and, indeed, the necessity, for reviewing local government finance. Many people will feel that the Bill does not go far enough. Certainly it is not the last word to be said on the subject. But I hope to show the House that it represents a major advance, paving the way for future developments. This is based on the principle that the right financial framework is one in which central and local government can work as partners, each representing its proper responsibilities with the minimum of overlap and potential conflict.

Basically the Bill does four things. Firstly, it provides a system of grant designed to enable new local authorities to operate with the maximum of efficiency. Secondly, it makes important changes in the rating system, particularly in so far as it counteracts the regressive nature of the present arrangements. Thirdly, it provides for the establishment of an ombudsman system for local government, a means of investigating complaints about the administration of local government, which should prove of great value in enabling councils to do their jobs more effectively. Fourthly, it abolishes a wide range of central Government controls over local authorities which may have been at one time or another introduced for good reason but which it is now right to dispense with.

All these proposals have been the subject of very full consultation with the representatives of local government, and I should like to thank them and, indeed, many others who have made representations which have helped to strengthen the provisions of the Bill.

I shall try to deal in turn with the four main issues—grant, rates, local ombudsmen and control. First, I should like to comment on the reasoned amendment in the name of the right hon. Gentleman the Leader of the Opposition, which criticises the Government for not providing additional sources of local finance. I reject that criticism completely, in so far as the Government do not think that this is the right time to introduce new local taxes. The system of rates, the local authorities' own tax, is well tried, well known and easy and cheap to administer. These are major advantages which have, so far at any rate, not been found in the alternative ideas which have been put forward.

No one should be surprised that the Bill contains no new taxes to replace the rates, because we made quite clear in the consultation paper issued last June why we did not propose to allow local authorities to introduce any new local taxes at this time. First, we do not think that taxes of that kind ought to be introduced at a time of pay and price restraint. Secondly, it has to be borne in mind that we are already carrying through nationally a radical reform of both direct and indirect taxation. This is not, therefore, the moment to introduce new taxes which would involve complex administration and collection. But, at the same time, I have made clear at those meetings I have had with local authority associations and others that I do not in any way rule out further discussion when the new local authorities are established and in full operation. Thus, if I may give one example, the Government have been and are giving a great deal of thought to the law relating to lotteries for charitable and other organisations, including local authorities. In order to assist public discussion of this topic, the Government hope shortly to publish a report of an official working party which has been reviewing the position regarding lotteries and the possibility of amendments to the law.

Some people in the local authority associations have suggested that we ought, perhaps, to have a Royal Commission on local government finance when the new authorities are established. It may be that they are right. But it was the Leader of the Opposition who said that they are apt to take minutes and to waste years. As I have said, in the case of lotteries there may be measures of reform that we can take step by step, and that may be the better way to proceed.

Mr. Sydney Chapman (Birmingham, Handsworth)

Does my right hon. and learned Friend agree that the crux of the problem is simply that when a Royal Commission was set up to look into the reformation of local government it should also have looked at the reformation of local government finance? Was that not the beginning of all the problems we face today, particularly over the rate support grant?

Mr. Rippon

There may be some substance in that observation but we have to face the situation as it now is, which is that successive Royal Commissions, interdepartmental committees and other bodies have tried to find a simple alternative to the rating system. I know that I have tried. So far no one has come up with anything that is reasonably practical.

In considering the Bill we have to put it in the general context of local government expenditure. This again has a bearing on what the reasoned amendment says, though how it can express the views contained in it when the Opposition do not know the figures I find difficult to understand.

I am well aware of the general concern about the level of rates next year. Some increases are inevitable because local authorities cannot avoid the increases in wages and other costs that are affecting all sections of the community. The authorities are also committed to providing steadily improving standards of education, social services, environmental protection and other desirable services.

I remind the House that we are making two changes next year which will relieve the burden on the rates. Local authorities will no longer have to meet the cost of local health services, and they are also to be relieved of 90 per cent. of the cost of mandatory awards to students. These two changes together will reduce local authority expenditure by more than £330 million. In addition, local authorities will no longer be responsible for sewerage services, but since for the next few years these services will be financed by a charge collected for the regional water authority by the local authority I have taken this charge into account in considering the total burden of rates.

However, that still leaves large expenditure as the responsibility of local authorities, and, of course, I understand that many of my hon. Friends feel that here, too, we should have gone further. That is certainly an arguable proposition. I am among those who from time to time have said that this further relief of the rate burden in respect of certain central charges should be examined again. We have made a most substantial start. The expenditure which local authorities incur is, of course, part of the public sector and my right hon. Friend the Chancellor reiterated in the debate on the Gracious Speech last week that we are committed to containing the growth of public expenditure in the interests of the economy as a whole. I warned local authorities a year ago that they would have to limit the rate at which their expenditure was growing. I repeated that warning again following my right hon. Friend's announcement on 21st May this year. Many authorities took note of what I said but I repeat the warning now to those who need it.

Next year outside London there will be new local authorities. I well realise that they wish to start their new existence by providing high standards of service backed by adequate staffing and other facilities. However, I cannot accept, as was reported to me from various parts of the country, that it is necessary for a new district covering the area of two or three old authorities to require more staff than the total employed by the three predecessors.

Mr. Denis Howell (Birmingham, Small Heath)

May I question the point that the right hon. and learned Gentleman was making a few moments ago concerning the growth of local government expenditure, which the Chancellor said last week is to be confined to 2 per cent. or thereabouts? What is not clear to many local authorities and to myself is whether, when the Chancellor spoke of a growth rate of 2 per cent. in real terms, that means that the increased charges, high interest rates and so on facing local authorities will come out of the 2 per cent. or does the 2 per cent. exclude these factors from which no local authority can escape?

Mr. Rippon

I have put these matters in a general context. I shall shortly be making proposals to the local authority associations about rate support for next year. We are now in the middle of the discussion, and matters of this sort are being considered in connection with the formula and the total grant the Government may make available.

In putting forward these proposals I shall be assuming that local authorities will be heeding our warning and will be playing their part in containing public expenditure on things which we know they control, such as total levels of staff. On this basis I shall be proposing a rate of grant that has regard to the importance of keeping down rates but is not so generous as to encourage authorities to spend unreasonably. I shall be combining it, however, with much more generous relief to domestic ratepayers. The Government's proposal is that the present domestic element of rate support grant of 6p in the pound will be increased to a minimum of 10p with more available for those areas that may be receiving a smaller share of grant under our new formula. This 10p relief, therefore, will represent at least a 20 per cent. domestic derating overall, and for many areas it will be considerably greater.

Mr. Julian Ridsdale (Harwich)

Is the water rate to be derateable, because it bears hard on those with small fixed incomes?

Mr. Rippon

I shall be coming to rate rebates and whether the water rate is a rate or not. It is not for this purpose—it is a charge—but I shall come to that later.

The combined effect of the proposals I have outlined is that over the country generally increases in domestic rate burdens will be substantially less than the likely increase in earnings under phase 3, and they will be further mitigated for many ratepayers by the increase in statutory deductions from gross rateable value and under the new rate rebate scheme. I shall go on later to deal with it.

Mr. Timothy Raison (Aylesbury)

Will my right hon. and learned Friend say whether these arrangements make special allowance for those counties which lost large chunks of a high rateable value to other counties?

Mr. Rippon

I have not yet had an opportunity to describe the arrangements. Perhaps it would be best if I set out in detail what we are now in the process of negotiating and how we hope to deal with it. The actual increase will vary from area to area, and that is why there is the variable domestic element. The actual increase will be affected by whether the local authority makes its budget realistic. If it increases its expenditure beyond the level we think justifiable, its rates will have to rise, and it will have to answer to its ratepayers for that. Provided local authorities keep to the increase in public expenditure which we think justified—and that is a growth rate of 3½ per cent. in current expenditure—on their services next year, the domestic rate burdens on average should rise less than the overall increase in earnings.

Clauses 1 to 5 provide for the establishment of the new rate support grant system. To that extent they are the machinery under which we shall have to make a rate support grant order, and we cannot make the order until we have the machinery. They set the framework for annual negotiations, of the kind currently in progress. I should emphasise that our debate today does not in any way prejudge the negotiations about the precise formula to be adopted for the distribution of the total grants as between one authority or another.

I have had two informal meetings with the local authority associations to take account of representations which they and others have been making to me My officials will put revised proposals to the associations this week which will take account of discussions that I have had. Then there will be what is described as a statutory meeting at the end of November to iron out our final position. That is why I ask hon. Members not to anticipate the precise effect on their own areas at this stage.

We have made already a number of changes in the original figures put forward in the working documents. This process must continue. I can tell the House that our proposals include a new needs element formula, based on an analysis of recent local government spending and a new level of resources element. The result will be to divert more of these two elements than before to the problem areas of cities. The House will recall that one of the criticisms last year about the distribution of the existing formula was that it failed to take sufficient account of the problems of inner city areas—such factors as reduction in population not leading to reduction in expenditure but rather the reverse because of the nature of social problems created.

That will, inevitably, mean grant losses for some areas as well as gains for others. It will not mean that the domestic ratepayer in the losing areas will suffer, because we shall use the new flexibility in the domestic element provisions to protect him from the impact. That will make a substantial difference to many people.

Domestic relief will be highest in areas where the share of grant is going down and in certain places where water re-organisation might otherwise result in exceptional increases of water supply and sewerage charges. That is why 10p is to be the minimum domestic element, bringing, in effect, a 20 per cent. derating, but in areas which lose grant there will be more relief.

We intend to issue a White Paper once our negotiations with local authorities are complete. We will then have a full discussion on those issues in the debate on the Rate Support Grant Order.

Clause 6 provides for supplementary transport grants, the background to which was set out in "Urban Transport Planning," the Government's observations on the Second Report of the Expenditure Committee, Cmnd. 5366. Transport planning, we believe, requires a mix of different measures: new roads, better public transport, better management of the existing system, appropriate restraint and parking policies. Some of these matters are dealt with in the Road Traffic Bill which has been presented in another place. It is a broad area, on which much further discussion needs to take place. We accept that such matters need to be looked at comprehensively. In the past that was difficult because, first, the local authority organisation has not been right and, second, the grant structure has not been suited to such an approach.

The first of those problems has been put right by the Local Government Act 1972, which creates larger local authorities covering more areas for transport planning—especially in the conurbations with the new metropolitan county councils—and gives the new county councils responsibilities for public transport, as well as roads and parking.

But it seems to us that two further changes are needed. First, the new counties should develop comprehensive transport policies, and, second, a number of specific central government grants for transport should be discontinued and replaced by a new system of transport supplementary grants.

Under the Bill supplementary transport grants would be distributed to those county councils, or to the Greater London Council, whose estimated transport expenditure in a year, as accepted for grant purposes by the Secretary of State, exceeded a prescribed threshold.

Supplementary grant will be based on comprehensive programmes, not on individual schemes, and will be available for all types of local transport expenditure without distinction between capital and current expenditure or between public transport and roads. The system is described in more detail in the Department's circular 104/73, issued to local authorities in August this year, and will be introduced from 1st April 1975.

I think the new arrangements recognise that different transport policies are needed in different areas and that local authorities are best placed to decide how local transport needs should be met.

We are dealing with machinery in relation to the Bill. I am sure that the House will agree that the flexibility the new system provides, and the real opportunity it will give to county councils to determine their transport policies in the light of the operating needs of their own areas, are a great step forward and an integral part of our general objective of placing more responsibility on local government.

Clause 7 introduces a new supplementary block grant to be paid to county councils in respect of expenditure on national parks. I remind the House that this provision is in fulfilment of the firm undertaking which we gave during the passage through Parliament of the 1972 Act that the greater part of the expenditure on national parks would in future be borne by the Exchequer.

Clause 9 extends the present power of the Countryside Commission to give financial assistance to countryside projects.

Mr. Arthur Blenkinsop (South Shields)

Is the Secretary of State aware that many of us welcome Clause 9 in so far as it offers independent finance to the commission? Does this mean, however, that the commission will have resources to enable it to appoint effective staff, and so on, and it is not merely a cosmetic part of operations?

Mr. Rippon

It is intended to be effective. I hope that if anything in the Bill is defective in that regard the hon. Gentleman will be available to ensure that it is not in any way cosmetic. I assure the hon. Gentleman that we think that this is one way in which we can make much more flexible the provision of financial assistance for countryside purposes and remove any unnecessary restrictions on the way in which the commission exercises its statutory functions.

Part II of the Bill covers rating. I think the House will agree that this is a crucial part of the Bill, and I should like to spend a little time—I hope not too long—explaining what we are doing and why are doing it.

The main defect of the present system is that rating is regressive and that rates do not correlate well with income levels, that those at the lower end of the scale pay more pro rata in rates than the better off. This is at the root of many of the problems that arise in the system as a whole. It is this problem that the Bill now tackles in a number of ways, first by the introduction next April of a new rate rebate scheme.

The new scheme will, in particular, extend relief far higher up the income scale than under the present rate rebate scheme introduced in 1966 by the previous administration. It will also be able to deal much more quickly than the present scheme with changes in ratepayers' income, because rating authorities will be able to have regard to an applicant's current income instead of past income as under the current scheme.

The present scheme was introduced, as the right hon. Member for Coventry, East (Mr. Crossman) told the House on 6th December 1965 when introducing the measure, as "an interim device" to reduce the regressive impact of rates on those with low incomes. Experience of the current scheme, as our Green Paper two years ago pointed out, has revealed its main weaknesses. It is no criticism of the Opposition that these weaknesses have appeared. It was, as I said, an interim scheme. However, weaknesses have been revealed.

First, the scope of the scheme is limited. The qualifying income levels are not much above the level of supplementary benefits. They fall short of the levels of income at which rates cease to be regressive. Secondly, all those whose incomes fall within the qualifying limits, by a substantial amount or only marginally, are entitled only to the same amount of relief. Thirdly, the treatment of income from disablement pensions and that of additional members of households, such as housekeepers and relatives other than spouses, is anomalous and can cause hardship, although some relief in connection with the treatment of the income of the disabled was afforded by what is now the Rate Rebate Act 1973 introduced early this year by the hon. Member for Derby, North (Mr. Whitehead).

Those weaknesses in the present scheme will be removed by the Bill. The Bill contains enabling provisions under which I shall make regulations to introduce a new rate rebate scheme graduating relief according to income and extending entitlement higher up the income scale than under the current scheme. I intend to make these regulations immediately after this measure has received the Royal Assent.

Perhaps it will help if I indicate the outlines of the scheme. They will be as follows. The classes of domestic ratepayer eligible for a rebate under the new scheme will, in general, be the same as those eligible under the current scheme. Domestic ratepayers receiving supplementary benefit, which includes an amount to cover their rates bill, will, as at present, generally be excluded. This is simply because the Supplementary Benefits Commission will be paying their rates, so the question of a rate rebate does not arise.

However, because of the improvements we have made this year to the rent scheme, with which the new rate scheme will be linked, there will be some people for whom rate rebates will be, as it were, a better "buy". We shall therefore be taking steps to ensure that those who are in this position know the facts and get the maximum amount of financial assistance to which they are entitled.

I am sure that the House will appreciate that this will help, not only with the local administration of both these schemes, but also to increase the takeup of benefit under both schemes, since the local authorities which receive an application for a rent rebate can at the same time check whether the applicant is also entitled to a rate rebate. Thus, an entitled person will not have to make two applications.

As under the rent scheme, a domestic ratepayer's entitlement to a rate rebate will be determined by reference to his needs and his income. The needs allowances will be exactly the same as those in the rent scheme—for example. £15.50 a week for an individual without dependent children, £20.75 a week for a married couple and for an individual with one dependent child or children, with an increase of £3 a week for each dependent child.

The definition of "income" will also be the same as under the rent scheme. This will mean, in particular, that attendance allowances for the disabled will be totally disregarded for rate rebate purposes and also the first £2 of any war or industrial disablement benefit and certain other similar payments will be disregarded. I am sure that that will be in accordance with the wishes of the whole House.

Mr. Idris Owen (Stockport, North)

Before my right hon. and learned Friend leaves the subject of support by way of rebate, may I ask whether he has considered the dilemma of people occupying rather old property—Victorian and pre-Victorian property—who have very high maintenance costs on that property which are not adequately reflected in the assessment?

Mr. Rippon

I shall be dealing with the increase in the statutory deductions from gross to rateable value, on which my hon. Friend the Member for Essex, South-East (Sir Bernard Braine) pressed me forcibly and effectively. I am dealing now with the rate rebate scheme. This will apply generally whatever the type of house and whatever its gross and rateable value.

It will probably be most helpful for me to give some examples of how we calculate that our proposals will work in practice. In all these examples I assume that the weekly rates are £1 and that the income of the ratepayer counts entirely as income for rate rebate purposes—that is, that none of the income falls to be disregarded because it is in part made up of, say, an attendance allowance paid to a disabled person or a war disability pension.

Perhaps it would be convenient, rather than that I should give too many examples, for me to concentrate on the case of a married couple with two children. If their income is £18 a week and their weekly rates are £1, the rebate payable will also be £1. Under the current scheme the rebate is 57p a week. If their income were £26 a week, their rebate would be 62p a week—nothing under the current scheme. If their income were £30 a week, their rebate would be 41p a week—nothing under the current scheme. I think the House will agree that those are fairly substantial provisions.

No doubt the House will wish to have an indication of the likely number of domestic ratepayers who will receive the rebate under the new scheme, as well as an indication of its total cost. On the basis of the scheme which I have outlined to the House I estimate that about 3 million domestic ratepayers in England and Wales will receive a rebate in 1974–75 under the new scheme, compared with about 300,000 at present. The loss of rate income arising from the grant of the rebates could be £90 million to £95 million in that year, but the specific grant to be paid to local authorities in respect of the new scheme will be 90 per cent., in accordance with the provisions of Clause 8, instead of 75 per cent. towards the cost of rebates granted under the current scheme. In other words, rating authorities will be reimbursed about £85 million of the £95 million loss of rate income.

I draw the attention of the House to Clause 12 of the Bill. Subject to the fact that nobody will be entitled to a smaller rebate than under the statutory schema, Clause 12 gives a rating authority powers to make its own rate rebate scheme to meet local circumstances and, in certain circumstances, to be rather more generous.

I believe that the House, and the country, will be able to judge, from what I have said, the scale of the exercise we have undertaken, the real benefits it will bring to those at the lower end of the income scale, and the way in which the action we are taking is fully consistent with the philosophy underlying our policy generally—to give help most generously where it is most required.

Mr. Kenneth Marks (Manchester, Gorton)

Although I welcome the announcement by the right hon. and learned Gentleman about the extension of the rate rebate scheme, it does little in total about the regressive nature of rates. The 3 million people who will receive rate rebates are only 15 per cent. of the total. The man with an income of £100 a week will receive as much rebate as the man who earns £35 to £40 a week. That is the trouble about rates.

Mr. Rippon

I ask the hon. Gentleman to study a little more carefully what I have said.

However, I believe that I have misled the House in one particular. I said that 3 million people were likely to benefit from the scheme, whereas the number benefiting under the old scheme was about 300,000, but I should have said that 800,000 were benefiting under the old scheme. That means that 2,200,000 more people will benefit on the sliding scale, whereas under the current scheme one was in or out. I hope that the House will acknowledge, as the hon. Gentleman has acknowledged, that that is a substantial step forward, although I recognise that it may be said that more should be done.

Local authorities will be free to judge the position in their own areas and decide whether to take further action to meet local circumstances. That is the advantage of Clause 12. Indeed, it is an advantage of the Bill as a whole. We are trying to create a flexible framework in which we can assess the situation from one year to the next. I do not envisage that the arrangement will last in perpetuity, or even for as long as the old rate support grant formula, which was from 1950 to 1956. There is built into the Bill, as the House will want, an opportunity to make further social progress as circumstances require.

Mr. R. J. Maxwell-Hyslop (Tiverton)

Are the income figures to which my right hon. and learned Friend refers assessable over a year or a shorter period? If they are assessable over a shorter period that is more helpful to seasonal workers, who for part of the year may have low incomes, or to staff employed by local authorities during the school term but who are on half pay during school holidays.

Mr. Rippon

As I tried to indicate, the purpose of the Bill is to provide flexibility and simpler, more effective administration. Applicants for rebate will therefore be assessed on their current income rather than on past income. It may be that hon. Members will wish to consider constituency cases in Committee, but our purpose is that the rebate should be given in accordance with the real circumstances of the ratepayers at the time they seek it.

Mr. George Cunningham (Islington, South-West)

I understood the right hon. and learned Gentleman to say, a few minutes ago, that the intention was that the rate rebate would be available irrespective of the level of the rates applied. Does that mean that an objection could never be made to the effect that the accommodation a person was using was excessive for his needs? The Minister will be aware that in some of the allegedly desirable parts of London the rateable values have greatly increased, and the traditional residents are now faced with very high rate burdens. Can I take it that it will never be argued against such people that they are living in accommodation which is too highly rated for them and that they are not, therefore, entitled to the full rebate?

Mr. Rippon

I have assumed, taking the country as a whole, that a married couple in an average house are paying £1 a week in rates. If, in the circumstances of a certain area, they are paying much more, a different calculation must be made; they receive the bigger rebate to which I have referred. The other matters that the hon. Gentleman raised, such as the question of objecting to the rateable value and what should be done about under-occupied property, do not fall within the provisions of the Bill.

A number of people would have liked a bigger Part II to deal with other valuation matters. There have been suggestions, for instance, that dwellings should be assessed on capital values, or, if not that, that capital values should be permitted to be adduced in evidence of rental values. However, we have felt compelled to confine the Bill to matters which can have effect now or in the near future. The two matters I have mentioned could not, even if the Government decided to accept them, be implemented before the next revaluation.

It is one thing to create an exemption during the currency of the valuation list, as in Clause 19 on garages for invalid carriages, which deals with an anomaly to which our attention was recently drawn by my hon. Friend the Member for Wellingborough (Mr. Fry); to ignore the minor structural improvements, as in Clause 20; or even to alter several million assessments in an arithmetically formulated way, as in the case of statutory deductions. It is quite another matter to alter the whole basis on which value assessments are made. But I can assure the House that these matters will be studied in good time before the next revaluation, so that legislation can be introduced in time if necessary.

Mr. Peter Fry (Wellingborough)

I should like to express on behalf of all invalid-carriage owners their appreciation of the very swift move made by my right hon. and learned Friend. Although it may be of only small financial assistance, it is very much appreciated.

Mr. Rippon

I am grateful to my hon. Friend. I assure him and the House that, in so far as the Bill creates new and, we hope, more flexible machinery, we shall be grateful now and in Committee to hear of ways in which we can deal with hardship cases of the kind to which my hon. Friend drew attention.

Clause 15 introduces a new flexibility into the law on the rating of empty property. As things stand, a rating authority which resolves to levy rates on empty property has no option but to make properties which have been empty for three months, or newly completed dwellings unoccupied for six months, subject to a 50 per cent. rate. The facts that rating authorities have no choice beyond rating all empty properties or none, that the 50 per cent. rate must apply to all properties, and that, once applied, the powers must ordinarily remain in force for seven years, have all been rightly criticised. They are very restricting, with the result that less than 10 per cent. of the rating authorities now use their powers. We need a more flexible system better adapted to local needs.

The Bill provides that the powers to rate empty property will remain discretionary, but the seven years' minimum period of application will be abolished. Authorities adopting the powers will be able to impose different percentages of the full rate up to 100 per cent. on different classes of empty property, and to vary both the percentage levy and the classes of hereditaments to which the provisions apply in different parts of the rating area. For example, I can envisage circumstances in which a rating authority would wish to deal with a particular class of empty property in one part of its area but not necessarily over the whole area. Where the imposition of the rate would result in hardship, the Bill provides for the rating authority to remit or reduce the rate.

I have already announced, in reply to a Question by my hon. Friend the Member for Essex, South-East, that I propose to amend the scale of statutory deductions from gross value. I shall be laying the necessary draft order before Parliament very soon. The main effect of the proposal, if Parliament approves the draft order, will be to reduce by amounts ranging from £1 to £9 the rateable values of about 10 million dwellings from 1st April 1974. Clause 16 contains provisions which will enable the changes to be carried into the valuation lists with the minimum of procedural fuss, providing another measure of real assistance to a large number of domestic ratepayers.

Mr. Gordon Oakes (Widnes)

Why has not the Secretary of State already laid the draft order? Why does he include hypothetical matters in the Bill when he had an opportunity to lay such an order before the Bill was published? It would have been preferable if the order had been laid at the time of the last revaluation. Millions of householders would not have had a sharp increase in their rateble value but for the delay by the Government in dealing with the difference between net and gross values.

Mr. Rippon

The sentence in which I referred to Clause 16 gives one of the answers to the hon. Gentleman. We need a much more flexible machinery to bring such provisions into effect. One of the results of the Bill will be that when we see a problem we shall not have to wait so long before giving effect to measures to deal with it. We must be able to move speedily. There was no point in laying the order before the Bill was introduced, in that we are talking about next year's rates, and it certainly will be in operation to affect them.

I am trying to conclude my speech quickly, but we are dealing with a major Bill, covering a wide area.

Part III of the Bill and Schedules 4 and 5 form an entirely self-contained section. Their subject matter, the establishment of an ombudsman system for local government, is important. I hope that the general principles will commend themselves to both sides of the House.

What we are doing, essentially, is to provide for local government a system for the investigation of maladministration akin to that established for central Government in the Parliamentary Commissioner Act 1967, but tailored to the specific needs of local government. It does not represent a new worry or concern about the standards of administration or conduct in local government. The options have been under discussion for some time. Indeed, proposals very similar in their essential purpose were put forward under the last Government. Provision of the system represents a general appreciation of the need to strengthen local democracy by giving a means whereby local issues of concern can be looked at quickly and dispassionately, and the opportunity for things that have gone wrong to be put right.

Maladministration is a concept much easier to recognise than to define, and Part III does not attempt to provide a specific definition. Instead, it is hoped to have the benefit of all the consideration which has been given to maladministration by the Parliamentary Commissioner in his various reports and by the Select Committee on the Parliamentary Commissioner.

Despite this common concern with maladministration, and despite a number of resemblances between the drafting of Part III and that of the Parliamentary Commissioner Act 1967, there are some substantial differences between the Parliamentary Commissioner Act system and that which we propose in Part III. The system will be entirely separate from, though equal in status to, the Parliamentary Commissioner Act structure. It is intended to be run and paid for by local government.

Instead of an organisation headed by a single commissioner, the Bill proposes a collegiate structure. It provides for separate commissions for England and Wales, consisting of commissioners each of whom will have jurisdiction in a particular part of the country. The commissioners will be appointed by the Crown, but only after consultation with bodies representing local government. The intention is that those appointed will be persons meriting the confidence of local government as a whole.

I stress that the whole purpose is that local government itself, through the representative bodies, should be in effective control of the new system. I also stress the key rôle that local councillors are intended to play in its operation. Just as the Parliamentary Commissioner system is designed to help Members of Parliament in the performance of their jobs, so this scheme is intended to help local councillors to do their job more effectively.

Clause 25 sets out the way in which the scheme will operate. Some hon. Members are concerned that their position should be safeguarded. Whereas in the first instance a complaint is made to a councillor, if the councillor does nothing about it the default powers of subsections (3) arise, and, if necessary, a Member of Parliament could take the case up on behalf of his constituent. As I said, local complaints will normally reach commissioners through a councillor, who, to some extent, is expected to act as a filter; and the councillor who refers a complaint will receive the report which results from the investigation. Another important element in the system is the emphasis it gives to local publicity, and the effect of public opinion in rectifying any maladministration by local authorities. Thus reports on particular cases by local commissioners will be made available for public inspection, and will no doubt be fully reported in the Press. That is the effective sanction.

Although I have emphasised some differences between the Parliamentary Commissioner Act organisation and that which we propose, obviously the two jurisdictions cannot be completely separated. Quite a number of transactions concern both central and local government at different stages, and there are also the National Health Service Commissioners for England and Wales, so that in Clause 32 the Bill provides the elements of a flexible procedure for dealing with such cases. In addition, under Clause 22 (2) the Parliamentary Commissioner himself is to become a member, by virtue of his office, of both the English and the Welsh Commissions—not for the purpose of handling local complaints, but to give the commissions the benefit of his experience, which will be particularly useful where composite cases are concerned.

There are no doubt many other matters which the House will want to examine closely in Committee—perhaps, in particular, the exclusions from the jurisdiction of the local commissioners under Clause 25(6)—and my right hon. Friend the Minister for Local Government and Development will, if necessary, deal with those points in winding up. I hope there will be general agreement that the basic schemes is sound. I do not think it is necessary for me to dwell at any length on Part IV of the Bill, which deals with a number of miscellaneous and supplementary matters. It will be noted that Clause 34 amends existing legislation so as to remove or relax a number of controls over local authority functions, and empowers the Secretary of State by order to make further amends for this purpose from time to time. I emphasise that this is a power which I would wish to see fully used.

Mr. Maxwell-Hyslop

My right hon. and learned Friend has used the words "by order". Can he remind us whether that means an affirmative resolution, for which the Government have to provide time, or a negative resolution, which can run out of praying days before it reaches the Floor of the House?

Mr. Rippon

That is a point which it may be necessary to take up in Committee. I should have thought that in the generality of cases the negative procedure was necessary. After all, we are talking about removing a control, and that is usually rather popular. But I shall certainly look into that point, and my right hon. Friend may have more to say in winding up the debate.

I hope that the general review which I have given of the provisions of this major Bill will demonstrate to the House what we are attempting to achieve, and will, in particular, emphasise the Government's determination to give local government a firm and strong financial basis on which to operate. I hope the House will agree that what I have said about the rate rebate scheme shows the consistency of our social policies and our willingness and ability to give a real measure of help where it is most needed.

4.33 p.m.

Mr. Dennis Howell (Birmingham, Small Heath)

I beg to move, to leave out from "That" to the end of the Question, and to add instead thereof: This House declines to give a Second Reading to a Bill which provides insufficient financial provision for local authorities to enable them to meet the need for essential services and the increased costs of administration brought about by local government reorganisation, which will inevitably increase the inequitable burden on the domestic ratepayer, and which makes no provision for additional sources of local finance other than the rating system. We in this country are in the throes of the greatest upheaval in local government which has been experienced for many generations, and this Bill is intended to finance it. Perhaps it will not be out of place to remind ourselves for a moment or two of the importance of local government to the ordinary citizens of this country. It is a subject of supreme importance which concerns ratepayers at least once a year; it is a subject that ought to exercise the House more than it does; and it is certainly a subject which ought to exercise the media more than it does. I remember that when the right hon. Gentleman the Minister for Local Government and I were having one of our friendly encounters on a previous Bill, one of the parliamentary sketchmen wrote about us that we were a couple of worthies dealing with a rather dull subject, doing it reasonably adequately, and that perhaps that was as much as needed to be said.

I have noticed that this Bill on local government reorganisation, which affects the lives of every person in the country, is not a subject about which the media have grown very excited. The right hon. and learned Gentleman and his right hon. Friend have not had great invitations to discuss the Bill on television and radio, and I certainly have not. But if we were my hon. Friend the Member for Birmingham, Sparkbrook (Mr. Hattersley) and the gentleman whom he encounters, discussing what is to be done about private schools—which is important, but which affects only 6 per cent. of the people of this country—we should be appearing every week and at weekends. No doubt private schools are an exciting subject for the media, but they are nothing like so crucial for the people of this country as is this subject.

Perhaps it is well to remind ourselves of what local government is all about. It is about the housing of the people of this country or about providing services for their housing; it is about educating their children; and it is about sustaining people when they are old or sick; and it is about providing for people's leisure—sport, the arts, reading and so on. Local government is the very stuff of life itself, and it is in that sense that we should approach this debate. This Bill is to be judged against those criteria, against public need, against the provision in an efficient and economical manner of those services which I have just mentioned, and on a more expansive basis, and the services provided must be related to the ability of the citizens to pay for them. The question is: does this Bill meet those needs? The answer, I am sorry to say, is that it certainly does not.

I will not say that the Secretary of State has put the clock back today; that would not be right, because there are parts of this Bill which I welcome. I suppose that the clock could be said to be standing still. But information has reached me that, for the first time in history, the clocks of the House of Commons were moving backwards while he was speaking, since the power cut has put back the clocks in this Chamber. So it is possibly symbolic that time stood still while the Secretary of State for the Environment was making his speceh. That is indeed the Opposition's case about local government reform, because this Bill is a retreat from every progressive thought that crossed the minds of all those people who have devoted thousands of hours to the subject of local government reform since the Redcliffe-Maud Commission was established; and, in particular, it is a retreat from the new ideas about raising revenue for local government.

Let there be no doubt at all about the massive nature of the retreat by the Government, because, step by step, we have seen them moving backwards from the position which the Redcliffe-Maud Commission took up, from the position which this House took up and from the position which they themselves took up. First, the commission was established, bringing with it the case for reform. We argued about the substance of the reform, but the desire for reform is, I think, accepted on all sides of the House. Then we had the view of the local authority associations, of the academics of the Press and of the Government themselves. When they looked at this question, the Government produced a Green Paper which discussed a number of challenging ideas for new means of financing local government, for injecting into local government new ways of raising revenue.

It was a step backwards from that position when we got the White Paper and the consultative document. There was a movement away from the challenging thinking which the Government had introduced into our discussions. Now we have this Bill, which sinks the hopes of almost everyone in local government about what is to be done to finance these services in the future. It has been an organised retreat on a massive scale and a victory only for the timid Ministers and Treasury diehards who have been in charge of the operation.

Those people, including the Secretary of State today, have found it better to deploy the arguments against every possible alternative to the present rating system than to accept the challenge of the need for new and adventurous thinking. I notice that the Royal Commission itself said when reporting on local government reorganisation: Without … complementary financial reforms the new local government will be cramped and handicapped as a self-governing institution. We therefore urge that the opportunity offered by reorganisation be taken to examine fundamentally the shortcomings of the present local taxation system and remove them. Those were the brave and hopeful words of Redcliffe-Maud which have now disappeared into oblivion in the course of the speech of the Secretary of State.

The Redcliffe-Maud Commission was even more perceptive. In a comment about new forms of local taxation and about how they might be dealt with it said: … taxes will not be considered piecemeal, each one being discarded because it has some disadvantages as a local tax. That is exactly what the Government have done. It is what the pundits in the Treasury have done. As every new idea has come up, the objections to it have been produced without any of the advantages being seized. The objections to the rating system which is to be perpetuated have never been thoroughly understood, explained and compared with the new possibilities. This is a missed opportunity, and it is a sad day for many of us in local government not only for that reason but because it will add to the sense of public disillusionment with local government and with politics in general.

In politics today there is no one subject which has as much public disapproval as the rating system. People do not understand the system. They do not understand how it can operate fairly. They do not believe that it is operating fairly. Indeed, it is not operating fairly. It is geared against the needs of local government. Today the Secretary of State has announced an imaginative extension of the rate rebate system which I welcome and intend to say more about in a moment. But the right hon. and learned Gentleman has had to tell us that it is now necessary for 3 million ratepayers to be subsidised. That very fact is the biggest condemnation of the rating system that I have ever heard. It would be impossible to produce a bigger argument against the system than to say that it is now almost impossible to operate it unless we subsidise nearly every ratepayer in the country.

Apart from the massive new means test which will be required to operate the system and the increased administrative costs necessary if we are to look into peoples' means, it is a massive condemnation of the system to have to admit that 3 million households will find a subsidy necessary to them. Surely that is the death knell of the system itself. Can there be a bigger argument for burying the system, especially at a time of local government reform? Today we are considering a new Bill on local government finance. Ought not we to seize the opportunity to alter the present situation?

Mr. Sydney Chapman

The hon. Gentleman seems to want to bury the present rating system, and there are hon. Members on both sides of the House who believe that the system is illogical, unfair and out of date. I share the hon. Gentleman's view. But is not the great tragedy that the opportunity was missed not by this Government but by the previous administration? May I remind the hon. Gentleman that the then Prime Minister, in setting up the Redcliffe-Maud Commission in 1966, said specifically in this House that the reform of the financing of local government should be excluded from the terms of reference of that commission? Is not what the hon. Gentleman is saying today a condemnation of his own Government for not grasping this nettle?

Mr. Howell

Strange as it may seem, I was not attempting to make a party political point. I concede that there is considerable force in what the hon. Gentleman says. With a degree of hindsight, I am inclined to agree with him.

The problem with Royal Commissions is to keep them within manageable proportions. We gave the Redcliffe-Maud Commission a tremendous task, and it fulfilled it with some distinction. It might have been better to have added finance to its terms of reference. However, the biggest criticism that all of us have is that we ought to have reformed the financial structure of local government before dealing with local government itself. There is a good deal of evidence to suggest that that would have been the best way to proceed.

Further, on the Royal Commission point, the Opposition do not believe that the situation can be left where it is. The present rating system is totally unsatisfactory. I understand that the Association of Municipal Corporations has suggested that, if we cannot have reforms in this Bill, we had better get on with it anyway but, simultaneously, we should appoint a Royal Commission to examine all the various alternatives to the present rating system.

The Opposition agree entirely with the AMC. The least that should be done at this stage is to make an examination of all the alternative methods of financing local government and to put that task into the hands of people independent of the Treasury. The appointment of a Royal Commission seems to be the right way to deal with the matter.

The timing of this Bill presents the Opposition with an enormous dilemma. All the alternatives have been rejected. If we were doing our public duty, we would scrutinise the Bill thoroughly. We would table amendments about each one of the alternatives to the rating system in order to see what the Government had to say and in order to examine each one of them in detail. However, if we did that we would create an impossible position for local government. The new forms of local government come into operation on 1st April. They need to know where they are to get their money. They want to know whether Parliament approves of these methods of raising money, and they want to discuss the basis of this Bill with the Secretary of State.

I must say some harsh words about the Government's timing of this Bill. It is a public scandal in the real sense that the Bill has been delayed for so long. It should have come before local government reorganisation. It should have been introduced into the House two years ago. It was promised in the Gracious Speech last year and it should have been put on the statute book last year. Instead, it is introduced within four or five months of the new forms of local government, on which it depends, getting to work. What on earth are the treasurers of our local authorities to do? This is the moment for them to do their estimating. They must decide what will be the resources element, the needs element and the domestic element. Those are the matters which they want to know about. They must decide and advise their council colleagues how the estimates should be made out and what sort of rate yield they can expect.

The Government have introduced the Bill far too late. The Opposition have a great respect for local government. We recognise the dilemma in which we shall be placed in committee. We shall undergo a self-denial ordinance. We shall not be able to examine in detail—that is not because we do not wish to do so—all the means of alternative financing and the detailed consideration which we would automatically give to the Bill. In Committee, if the Bill has a Second Reading, we shall seek to apply ourselves as constructively as possible to the various clauses.

I now turn to the reason for the Government's retreat from new forms of finance. They were rehearsed by the right hon. and learned Gentleman. I am bound to say that they do not convince anyone with whom I have discussed them. They are to be found in paragraph 2 of the consultation paper on local government finance in England and Wales. It is there said: The Government believe that the public would not welcome, at the present time of prices and pay restriction, the introduction of additional new taxes locally. I have not the impression that the Bill is a temporary matter. It is not a temporary measure to deal with the present prices and incomes policy. It is a Bill which we know will be on the statute book for at least 20 or 30 years. Judging by previous local government Bills, it will probably be on the statute book for even longer.

We cannot put off an examination of new forms of local taxation. The situation is not determined by the Government's prices and pay policy. In the consultative document the Government say: The Government are currently carrying through nationally a radical reform of both direct and indirect taxation… None of us has found that any of those reforms have affected local government. The complaint is that the reforms have added to the burden on local authority rather than removing the burden. I am totally unconvinced by the case which the Goverment has put forward.

Mr. Michael Shaw (Scarborough and Whitby)

Do I understand from what the hon. Gentleman has said, in spite of the complaints which he is now voicing, that should his party gain power at the next General Election it will bring no reform into the measure?

Mr. Howell

I have just proposed the establishment of a Royal Commission to consider local government finance. I would hope that the commission would report as quickly as possible. It is my view—I put this forward when the House was considering local government reorganisation and I do not want to rehearse the argument again—and I remain firm to it, that the Government's local government reorganisation strategy will fail. I know that that is a bold view to put forward.

Judging by the time that measures of this complexity are on the statute book and the difficulty of finding parliamentary time, the Government are right to produce a Bill which, although I disagree with much of it, will stand the test of time and will serve local government for many years. Judging by past experience, the Government may be right. I hope that they are not, but it is on that basis that we must proceed. I have made my position clear about the rating system.

Mr. Rippon

The Opposition have had a long time to think quietly, and they may have much longer. It would be helpful to us all if they would give some indication of what new taxes they favour. Everything has been rejected. I hope that we shall hear from the hon. Gentleman what the Labour Party thinks is a viable alternative to the rating system or what he thinks should be a supplement to the rating system.

Mr. Howell

I can assure the right hon. and learned Gentleman that I have a splendid passage in my speech which I have reserved purely for that purpose. I am not leaving the rating system but rehearsing the arguments against it.

The fact is that there is no dynamism in the rating system. The system does not grow as the income of the individual grows. One of the biggest arguments against it is that the Government do not rely on any sort of tax on housing. We could not finance the country on the basis of a housing tax. The taxation system must be based, for purposes of dynamism upon the growth of income. If that is true for central Government, why should not it be true for local government? How can we sustain the argument that we finance central Government by a means of taxation which is geared to growth in personal incomes and company incomes, but take the opposite course when we come to local government?

The tax system has no regard to ability to pay. We are all aware of the tremendous grievance which can be summed up by the example of a widow paying exactly the same amount of rates for her house as the house next door where there are four or five people earning wages and bringing in wage packets every week. That is the dilemma simply stated. It is totally unfair. It is totally out of date and totally unacceptable to the hulk of the people.

I am glad to see that the hon. Member for Ripon (Mr. Austick) is present to represent the Liberal Party. When we consider the Liberal Party's alternative of site rating, that is almost as irrelevant as the existing rating system. Possibly it is more irrelevant. The fact is that site valuation rating has no regard to the individual's or the family's ability to pay. Therefore, that is not of serious consideration as we discuss the problems that face us.

When we consider some of the alternatives, I am glad that I can carry the right hon. and learned Gentleman with me. The alternatives have been discussed in a Green Paper. I want the alternatives to be examined by a Royal Commission. That is the right way to do it. I confess at once that some of my right hon. and hon. Friends might well have taken the view which the Government have taken about some of the alternatives. However, had there been a progressive approach to the matter it would have been possible to embrace one or two of the alternatives.

I know the arguments against local income tax. It would have to be collected nationally. I concede that it is an illusion to think in terms of local government finance and to suggest that we can never have a situation in which the Government will not have a major say in the amount of money that has to be raised. The Government must have that say. The Government must be in control of the totality of public expenditure at any time. That is important in the deployment of a general economic strategy. However, some means must be found to relate local authority income to ability to pay and to need. That seems extremely important.

The people who argue against local income tax and say that it is impracticable in terms of working it out always argue for bigger Exchequer grants. I can understand the logic of that. Bigger Exchequer grants coming from national taxation are based upon ability to pay because they come from national income tax. Fundamentally they are unhealthy for local government. I agree that if we do not have some form of local income tax or a measure of some kind we shall inevitably be drawn to the alternative of bigger Exchequer grants, with all the dangers for local government inherent in that situation.

There are those who say—I see that there is an amendment on the Order Paper to this effect—that another way of dealing with this is to transfer the teachers' salary bill from the local authorities to the national Exchequer. That has its attractions. If we do not have new forms of government I suppose it is an alternative which most of us would support. It would remove from local authorities a considerable voice in the determination of teachers' salaries. That may be right, but I think the teachers' unions would have something to say about it. My view, based on having been an education Minister for nearly six years, is that it is important for local authorities to have a voice in determining teachers' salaries and to be represented in the discussions on the Burnham committee.

I was pleased when Sir Edward Boyle, as he then was, decided in his day that the Government should have a say. The reality of the situation is that central and local Government have to come together in determining teachers' salaries. Nevertheless, this is an option open to us, and it is one which the Government have not considered seriously. Certainly the Secretary of State did not mention it during his speech.

There are other alternatives. One which I do not favour is some form of local sales tax. I know that the argument against it is that it would hit the poorest people hardest of all. It is because of that that I am against it. Since the introduction of VAT many of the administrative arguments against a local sales tax have disappeared because the shopkeeper is now a large-scale tax collector on behalf of the Chancellor. There is also the suggestion of a fuel tax, which would be an easy tax to collect. Since transportation and road costs are now so enormous it could be argued with justice that the collection of a local fuel tax is just as much of a necessity as the collection of a national tax.

Another alternative is super-rating, on which I had intended to say something but which I will now leave because of the right hon. Gentleman's announcements of his proposed scheme, which is another way of introducing super-rating. I am happy to welcome the announcements and to say that these measures will certainly be supported by us, apart from the reservations I made earlier about the general situation. Under a super-rating system industry and commerce would have to carry an increasingly larger load. This will have some deficiencies in many rural areas. Perhaps that is one of the reasons why it has been rejected, since it would not produce a just situation throughout the country.

The tourist tax has been mentioned, and it is an interesting possibility. The Secretary of State also mentioned lotteries. I am glad to hear that we might have a Bill on that. I am pleased to see the "Minister for Sport" sitting in his place. I know that he, like me as his predecessor, may well believe that sport has a lot to gain from the reform of the lottery position. I can see no reason why local authorities should not be empowered to run lottories, maybe to help the youth service, sport, the arts and other services which they would like to expand.

Lotteries have one great advantage. When the Chancellor comes to consider the general economic possibilities of the country as a whole, lotteries are not affected. The decision of a man to spend money on a lottery ticket as distinct from some other form of expenditure does not affect the totality of public expenditure. I was glad to hear what I thought was an encouraging note on this subject in the Secretary of State's speech.

There is one other method of raising money for local government with which I want to deal and about which we shall table an amendment to the Bill. There is no provision in this Bill for the encouragement and expansion in any way of municipal enterprise. I give notice that we will seek to move a general enabling clause which will empower local authorities to involve themselves in municipal enterprises of one sort or another which may be profitable and help the rates.

For example, I would like to see local authorities moving into the real estate business. It is the local ratepayers who are creating massive profits for property developers. The locality is there, services are being developed and provided by the ratepayers, and planning is done on behalf of the community as a whole; yet the vast profits being made are going into private hands. To adopt a famous saying of General Booth, the Salvationist, about the Devil having all the best tunes, why should local authorities have the dirty end of the stick over development? There would be real possibilities of assisting local ratepayers on an extensive scale if local authorities could go into property development and share in the property boom.

We have no confidence in the way in which the Government have rejected out of hand every one of these suggestions. That is why I support the view that we should have a Royal Commission to look at new forms of finance for local Government.

I move to the crucial question facing local government—at the end of the day, how much will local government have? The Government have rehashed the now traditional formula of needs, the domestic and resources element. The question of how much local government will have is totally unanswered in the Bill, and has to be because of local authority negotiations. I welcome the right hon. and learned Gentleman's announcement to increase the domestic element from a 6p rate to a 10p rate. It is much to be welcomed even though the scale on which it is being done seems to undermine the rating system.

I turn to the prospects before local authorities and their treasurers and particularly ordinary people, having regard to what is now being said about the expansion of local authority services. Let there be no doubt that local authority services in our main urban areas—and in the rural areas, too—are in a state approaching acute crisis. On Thursday we are debating the situation as it affects London. I do not complain of the editorial in the Daily Mirror this morning, which, in welcoming that debate and drawing attention to the crisis in London's public services, asks: what about the other big cities?

It is appropriate that we should spend a moment or two on this. The big cities recently sent a deputation to meet the Prime Minister and discuss their problems. I hope that in replying tonight the Minister for Local Government and Development can give some indication that the problems of the big cities will be dealt with and that when he talks to local authorities about necessary changes in the rate support system he will say in no uncertain manner that areas of declining population and increasing pressure, such as our big cities, will receive a bigger share of resources in future than has been the case in the past. If the Minister is able to make such an announcement after he has discussed the matter with his colleagues and with the local authority associations, I can tell him in advance that the Opposition will welcome it and support him.

One has only to speak to representatives in many of the big cities such as Birmingham, Manchester, Leeds and Liverpool—and I was on the telephone this morning to these cities—to hear the same story about the difficulties they face. Many are suffering a 20 per cent. shortage in the number of police and ambulance drivers. The subject of ambulance drivers cropped up again and again during my telephone conversations with local authorities this morning. The situation is causing grave concern, and this also applies to the shortage of public health inspectors and transport workers. Problems of urban renewal are weighing very heavily on local authorities, and there is a great shortage of the back-up social services which are so necessary to sustain family life in city areas.

Against this background the outlook for local government is bleak. If the problems are as great as I have been told this morning on my short "Cook's tour" of Britain by telephone, it is a quite inadequate answer to say that the growth of local government must be contained within a limit of a 2 per cent. increase—which is what the Secretary of State said today and what the Chancellor of the Exchequer said only last week.

It must be remembered that interest charges have risen astronomically, oil charges have increased, and there has been a 15 per cent. increase in local authority pensions. All this money has to be found. If all this additional money—money which will not give any additional services to local government—is to be found from a 2 per cent. increase in expenditure, this will mean a massive cut in local government services. If the Secretary of State was right in what he said to my intervention during his speech today, the outlook is indeed bleak.

When we look at local authority expenditure in recent years, we can see how the situation has been moving. In the early 1960s the expenditure was rising by about 6 per cent.; in the early 1970s the rise in the growth of local expenditure dropped to about 4½ per cent. The Chancellor of the Exchequer announced in May this year cuts of £81 million on an already inadequate programme. We are now being told that growth will be restricted to under 2 per cent. This will mean a serious situation for local government.

On top of an already difficult situation, local government has to cope with reorganisation. If the increased expenditure on local government reorganisation also has to come out of the 2 per cent. increase, this will compound the felony; it will create an almost impossible situation.

As we predicted when local government reorganisation was proposed, there have been massive duplication and substantial increases in local government expenditure. In some cases salaries have risen considerably. In many parts of the country local government reorganisation has been a means of evading phase 2 in the Government's prices and incomes policy. New jobs have been created at salaries far in excess of what would have been allowed in the Government's prices and incomes policy had reorganisation not taken place. This massive duplication of administration will have to be paid for by somebody, and undoubtedly that burden will fall upon ratepayers.

I wish to mention one or two important matters which we shall seek to raise in Committee. Clause 2(4) has been described to me by the Association of Municipal Corporations as obnoxious. That is perhaps a mild word to apply to a proposal which will mean that a metropolitan district will not qualify for a resources grant if the county concerned is not eligible. This is surely unfair, and I hope the Government will think again. There may be a situation in which a metropolitan county will not need the resources element, but within that county there may be some impoverished districts. Therefore, it seems to us wrong to exclude those districts.

I am told that on 5th November the Secretary of State, during discussions outside the House, gave an undertaking that he would make no such order this year. I hope that is true. Nevertheless, the power should not be in the Bill this year or in any other year. If the power remains in the Bill, I am told that no London authority would receive a resources grant, and this is of great concern to London Members of Parliament.

The second matter which we shall seek to raise in Committee arises out of Clause 20. The Government propose no change in rateable value between assessments where certain improvements have been carried out, particularly central heating. At first sight I was not quite sure what this meant. It seemed to us that what the Government were saying was that if somebody puts in central heating after 1st April 1974 he will for ever more be exempt from any question of that being added to the cost of the future rateable value.

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

Only until the next revaluation.

Mr. Howell

That was my interpretation, but it was not the interpretation adopted by my hon. Friends. I took another look at the situation and concluded that my hon. Friends were probably right on the wording as it now stands. Although I understand why the Government are taking this view, it seems inequitable to say to a householder "Put in central heating and we shall not increase your rateable value for a few years". Surely that is unfair to those thousands of householders whose houses already have central heating. When a person decides to spend money on central heating—a process that does not add to the area of the house as a whole—rather than spending the family income on a motor car, or going to the dogs, or going on holiday abroad—I do not see why he should be additionally taxed.

It is time that central heating was removed entirely from the whole question of rateable value. In Committee we shall seek to move an amendment to put this right, so that the provision of central heating in households will not prove to be a financial burden on householders. I am not putting this forward merely because I know it will be popular, although I am prepared to concede that we need all the popularity we can get. We are putting forward this idea because we happen to believe that it is the right thing to do. Therefore, I hope that Conservative Members will join us when we deal with this matter in Committee, and that we shall then have an all-party approach.

Mr. Arthur Jones (Northants, South)

Does the hon. Gentleman not agree that this may play havoc with the mechanics of rating valuation?

Mr. Howell

I am aware of the administrative difficulties. My treasurer mentioned these difficulties when I discussed the matter with him over the weekend, but I am sure that this is the right thing to do.

There are two further matters of concern in which we see merit. I refer to agricultural derating and rating of Crown properties. I do not think it is possible any longer to sustain the argument that, with food prices at such a high level and with support for the agricultural industry running at its present rate, agricultural derating should be continued. As for Crown property, I believe that it should be rated equally with other property.

I understand that we shall hear something from the Government a little later today about regional water authorities, rate rebates and the recovery of unpaid bills. This is a matter which is causing considerable concern, and I hope that more will be said on this subject when the Minister replies to the debate.

I understand that some local authorities have as many as 10,000 unpaid bills a year. Therefore, for this House to legislate that there must be two court actions in respect of each seems monstrous. I hope that we can clear up that situation. To have to go to the magistrates' court to deal with a default in payment of the general rate and then to the county court in respect of a default in the water rate seems untenable. I am sure that the Minister will want to make that position clear.

Clause 8 deals with a new rate rebate scheme, of which the Government are to pay only 90 per cent. We shall seek to ensure that the Government meet the whole of the cost of the new scheme. They should do so. If there are needy people who require these rate rebates they should be the responsibility of the community as a whole. Therefore, the whole of the rate rebate should be met by the Government.

In view of the time, I will not speak at great length about the ombudsman proposal. I hope that my hon. Friend the Member for Widnes (Mr. Oakes), who is to conclude for the Opposition, will be able to devote more time to this subject. I give the proposal a general welcome on behalf of the Opposition. The Government are right to introduce a local ombudsman, although in many cases local councillors provide this service in a way that Members of Parliament cannot in central Government. They have a closer relationship with officialdom in their localities than is possible for most Members of Parliament to have with civil servants here. That should be taken into account in any scheme that we produce. However, I think that an amendment is necessary to enable Members of Parliament to go to the local ombudsman about any particular case. We shall seek to put down an amendment to that effect.

Members of Parliament see thousands of constituents during the lifetime of a Parliament. People seem to think that there is some magic about a Member of Parliament. They look to their Member of Parliament as the custodian of their rights. Whilst it is right to give local government the opportunity to put matters right, nevertheless, if we are not satisfied, we should have direct access to the local ombudsman and we shall seek to achieve that situation.

The Bill does far too little far too late. It perpetuates all the worst features of the rating system. Inevitably it will mean large increases in the rate burden of domestic consumers, accompanied by a serious reduction in the standard of local authority services. A glorious opportunity for reform has been missed and it may be many years before such a chance occurs again.

For these reasons, we shall certainly register our disappointment and concern in the Lobbies tonight.

5.24 p.m.

Mr. Julian Ridsdale (Harwich)

The hon. Member for Birmingham, Small Heath (Mr. Denis Howell) has called for the appointment of a Royal Commission. I should remind him that over 10 years ago I called for such a Royal Commission. Alas, we are still in the position of having to call for a Royal Commission because successive Governments have failed to reform local government finance. The hon. Gentleman said that we should have reformed the financing of local government before reorganising local government. I agree with him. I pressed the Labour Government to do it just as I have pressed my own Government. We are paying a grave penalty for not having done it.

The rating system with all its complications—the Bill does not help—is becoming a Chinese puzzle and almost as difficult to understand as a mandarin's scroll. At a time when the Chancellor of the Exchequer is instituting a tax credit scheme to relieve many from means tested benefits, the Secretary of State for the Environment, supported by the Chief Secretary to the Treasury, brings forward this Bill, which will make a whole lot of new inflation-hit ratepayers apply for relief—the very people who, in more normal economic circumstances, would never have dreamt that they would have to apply for rate relief. I am glad that the means are there, but with proper forethought the need for such relief should not have arisen. This is one of my main criticisms of the Bill, although I appreciate that the Government are doing their best to help some of the people who will be seriously hit by the increase in rates.

The Government subsidise local government and then subsidise the ratepayer because he cannot afford to meet the demands of even a subsidised local authority. It is almost a Box and Cox position at the present time.

The present proposals are unimaginative and bureaucratic and can in no way be called the reform of local government finance for which I and many of my hon. Friends have been pressing. I wish that the Labour Party, when in power, had been bolder in this respect. Certainly, many of my hon. Friends and myself have been pressing successive Governments over the last 10 years to reform the financing of local government. What an opportunity the Government had to get away from subsidies which in no way ensure that we get value for money. Alas, this opportunity has been thrown away.

The proposals in the Bill make only minor adjustments to the costly financial structure of local government whilst harshly increasing some burdens that local authorities in the Home Counties, the Essex County Council in particular, which is my local interest, will have to face. Essex Members, led by my hon. Friend the Member for Essex, South-East (Sir Bernard Braine) have made strong representations about the proposed loss of grant. I hope that we shall get an answer on this point from my right hon. Friend the Minister for Local Government and Development, who I understand is to conclude the debate for the Government, as it affects not only Essex but many of the Home Counties.

We are concerned not only about the extra burden falling on the rates, but the other charges which will be affected, such as the water rate, and others, which will place extra burdens on the rural areas because of the reorganisation of local government itself. In all these areas the ratepayers face increased charges, apart from inflation.

In the inflationary situation that we are now experiencing I am sure that as so many of the extra burdens are national, not local, they should be borne by the taxpayer and not the ratepayer. Tax revenues, especially in inflationary times, are far more buoyant than rates.

As it is not the Government's intention to do this, will the Minister tell us whether the water rate will be rate rebatable? Certainly with the alterations which are being made in the rate support grant, particularly regarding sewerage and water resources, a strong argument can be made for this. In particular, the water rate falls heavily on those who I pressed in this House long ago should be relieved of the rate burden altogether. If the Government wish to give relief they should let it go to those who need it most, and those who need it most will be those who are paying the water rate.

In speech after speech on rates in this Parliament and on the Green Paper I have urged that national charges, such as education, should be paid for by the taxpayer rather than the ratepayer. The reasoned amendment which I tabled makes a plea that I have been making for a very long time. It is in no way met by the proposal in the Bill to pay for the mandatory awards and grants to students. I know that my right hon. and learned Friend gave the overall picture of about £300 million being taken off the rates, but he included items other than students' grants in that sum. Will he say what is the figure for students' grants? It is my feeling that it is a much smaller proportion than the overall figure that he gave.

When I first came to the House in 1954, education in England and Wales in that year was costing about £400 million. In 1967, when for the second time in five years I drew the attention of the House to this problem of local government finance, the figure was £1,500 million. In March 1972, when I again spoke in the House about this problem, the cost had almost doubled since 1967, in a short period of five years. Now, because of the high rate of inflation, the cost is more than £3,000 million, and is likely to get worse.

My right hon. Friend the Secretary of State for Education and Science has promised that by 1980 there will be 514,000 teachers. I welcome that, but I am concerned that 70 per cent. of total education spending is the cost of teachers' salaries and pensions. Is it right that the money to pay for this vast army of 514,000 teachers has to be found from the ratepayers, even though there is this huge amount of subsidisation promised in the Bill?

The number of teachers has increased by 100,000 during the last 10 years. The total of 514,000 is more than that of the Armed Forces put together. Would we ever think of putting the whole of the defence bill on the rates? That bill is lower than the education bill, yet we put the latter on the rates and make no attempt to reform the system of payment.

That is why I have been appealing to the Government—as late as February and March of this year, and in Motion No. 274 in the last Session—to stop thinking of subsidisation through the rate support grant. This kind of policy is causing extravagence, we are not getting value for money in education, and it is putting an extremely unfair burden on ratepayers. Let us face reality and ensure that such charges are paid directly by the taxpayer. A limit would then have to be on local rates, and it would be in keeping with the prices and incomes policy. Increases in rates are like increases in prices, and they hit just as hard. Why not say that any excess increases in rates must be justified to the Price Commission? That would be one way of tackling this serious problem.

It was more than 10 years ago that I drew the attention of the House to the increase in local government expenditure. I am glad to say that that led to the setting up of the Allen Committee and the start of the rate rebate scheme. Now reorganisation are to be met by in have to face because of local government reorganisation are to be met by in extension of that scheme. This is not reform of local government finance. This is improvisation. When will the Government face the reality of taking the educational burden, and that of other national charges, off the rates?

It is far fairer that a larger part of such charges should be paid by those who can afford them, rather than by those who cannot. I warned the Government during a debate in the House in March that if something was not done along those lines I should be forced to vote against them. I am gravely disappointed that the amendment in my name has not been called. I cannot agree with some of the views expressed by the Opposition, out, as a protest, because I feel strongly that the Government have refuted all the arguments that I have been putting forward and have brought in this piecemeal legislation, even though I admit that many parts of this measure are good, I shall have to vote against the Bill.

5.34 p.m.

Mr. R. B. Cant (Stoke-on-Trent, Central)

I share the belief of my hon. Friend the Member for Birmingham, Small Heath (Mr. Denis Howell) that local government is extremely important, not only from the point of view of the quality of life of the people concerned, but also in a strictly qualitative sense. But few people share that view, and the few hon. Members present is an indication that even Parliament pays little respect to what, after all, pre-empts about 18.7 per cent. of the gross national product.

I remember a television producer in the Midlands saying that he would like me to take my turn in the parade of Midland Members of Parliament "on the box". I agreed, and he asked me what I wanted to talk about. When I said "Local government", he replied "Oh dear. Nobody is interested in that". But then a light came into his eyes, and he said "Corruption, yes. We will discuss that. Can you bring in Mr. Poulson?" That, to some extent, is the estimate that we have of local government.

I feel that in a sense I may be slightly unpopular with my Opposition colleagues this afternoon, because I know that one would have liked to see a Bill which included a number of the taxes which my hon. Friend indicated in his new source of local revenue, and I think that that time will come, for all the reasons that he gave.

Rates are a regressive tax. People do not like them. Most people have to pay this tax in lump sums. They do not always see clearly that they are getting services for which they pay, but they often see other people getting services for which they are paying—children's education, and so on.

The Goverment having dawdled over producing the Bill, what we have to face is that it would have been totally impracticable to have introduced any major reform of local taxation now. I sometimes think that rates are rather like examinations. Everybody is against them, but nobody can find an adequate substitute.

We are dealing with a tax which raises not £100 million but £2,400 million. That may be more than the defence estimates. If it is, it is pleasing to know that we spend more upon education than on defence, and I am sure that it fulfils Plato's definition of a civilised country, but what we have to face is that no major reforms were "on".

There is one other aspect of this problem which impresses me. It may be that I am getting rather mellow. This year I am to receive my gold medallion for 20 year's service on the local authority. I may, therefore, be wedded to the system of rates in a way that is disgusting to my hon. Friend, but it stems from the fact that one has lived with it for so long.

The way I look at it is that we could do with a little less change in many departments of our life. Too many people who gain office—this applies to both sides of the House—think that they must go down in history as having introduced a major reform and turned the place upside down. I confess that I should have been happy to turn local government upside down on the Maud basis, because I think that the two-tier system which has been introduced into local government—as a responsible local elder statesman I must choose my words carefully—is leading to a measure of disturbance which is affecting elected representatives, the staff and the people who put us there. That is one reason.

We have also put forward the argument that this system is necessary because it will save money and make for greater efficiency. My hon. Friend the Member for Small Heath has suggested that some people are having rather serious misgivings about it. This is affecting the rates. During the last few months I have taken part in discussions at district and country level about the whole question of recruitment of staff. One might have hoped that one would have kept all of the old officials in local government and that new people from outside, in this local government reform, would have brought in a breath of fresh air. But too often this has been a sort of incestuous game of musical chairs. Too often when the music has stopped one official, perhaps, has fallen out—with an excellent retirement pension and generous redundancy pay—but another chair has been added. When one adds up the number of staff at local government level required to run Staffordshire in April 1973 and sees the substantial increase in the numbers that will be required in April 1974, one realises that this increase may eventually result in a 30 per cent. increase in the rates. However, I do not want to dwell on that point.

Mr. Keith Stainton (Sudbury and Woodbridge)

I entirely agree with the hon. Gentleman's forecasts of large increases in staff, and so on, in the short term, but could not this be a temporary phenomenon? Should not one be more inclined to take a five-year view of things as they will be when the reorganisation has settled down?

Mr. Cant

What I am afraid of is that everything may settle down on a higher plateau. Perhaps the memory of local ratepayers is short. Let us hope so, for the future prospects of elected representatives.

My third reason for supporting the Bill is one that was conceded by my hon. Friend the Member for Small Heath. Every city treasurer who has written to Members of Parliament has said, perhaps, "This is a terrible Bill but do not, for Heaven's sake, delay it unduly because the Government have us over a fiscal barrel, in the sense that if we do not get the Bill through fairly quickly, our local authorities will be somewhat deficient in funds". I am sorry that I cannot support my hon. Friend the Member for Small Heath today. The future will be different. As the Government have left it for so long, it would not be a practical proposition to try to introduce major reforms in local taxation now.

I want now to talk about rates and grants and about local authority borrow- ing in the Euro-dollar market. I do not want to enter into a general discussion about rates. Obviously one must accept what the Government have done. I cannot regard is at a step backwards. Although it introduces, perhaps, further administrative complexities, it is a step forward. The rate rebate scheme does not go far enough. The Secretary of State said, "You will be asking us to do more". Of course we say, "Do more". The scheme will not eliminate the regressive element of taxation until a person reaches at least about average earnings. I agree with my hon. Friend about the statutory deductions. How many hon. Members, on both sides of the House, during our previous debates on revaluation, asked the Government to do precisely what they are now doing? It would have been perfectly simple and it would have taken some, at any rate, of the rate burden off taxpayers. The Bill fulfils all that I want regarding the rating of empty property.

I have come to the conclusion that, in a sense, all these items will play a prominent part in the Conservative Party's election manifesto. They will undoubedly be acceptable. I am not cynical enough to suggest that they have been designed with that in mind. That would be quite improper, but I suspect that it may be somewhere near the truth.

I should like to encourage the Government to think a little about change in rates in the whole area of rating valuation. Anyone who has served for a long time in local government is always "anti-valuers", whether local valuers, district valuers, or whatever. But many of the problems that are associated with rating today arise because valuers have not done their job properly. Their job is to try to assess a rateable value based upon a hypothetical rental value paid by a hypothetical tenant, and so on, in a hypothetical free market. But revaluations going back only to 1963 have shown clearly that valuers take a very narrow view of their job. I should like the Government to broaden that a little. Valuers are concerned mainly with reacting to criticism. I shall not go into matters in detail and time. But the 1973 revaluations were adjusted significantly in response to criticism of the 1963 valuation such as under-valuation of small terraced houses and over-valuation of semi-luxury flats in London, and so on.

The main cause of error is simple. They worked on a very simple system of multipliers, whose function is to see to it that inflation and the fall in the value of the pound, and so on, has been taken into account. If the Government are to make sense of valuation and to make it realistic, they must draw valuers' attention to the fact that they must pay more attention to the rise of capital values. Here we are dealing with something which has become the biggest hedge against inflation, apart from the possession of a valuable picture. It is a hedge against inflation which is also an untaxed capital gain. Any attempt to work out a system of rateable values which does not take capital values into account is wholly unrealistic in this period of time. This would help my hon. Friend the Member for Small Heath.

If more attention were paid to this key factor rates would have a quality which it is alleged, nowadays, that they do not possess—they are criticised for not possessing it—namely, buoyancy. If my hon. Friend were an economist—he is too human and too nice to be one—he would say that rates lacked local fiscal drag. This would give it to them. The Government should talk to the valuers.

Regarding grants, as my hon. Friend has said, it all depends on how much. We do not know how much the total rate support grant will be. Discussions have taken place with the local authority associations. They know all about it. The House of Commons, as usual, knows nothing about it. Hon. Members are so used to this circumstance that they readily accept.

Mr. Graham Page

I am sure that the local authorities do not know the amount of the grant nor the percentage of grant on the relevant expenditure. They will not know it for some time until we have discussed it further.

Mr. Denis Howell

As I understand it the local authorities were not consulted about the proposals announced today by the Secretary of State in respect of the new domestic element being raised from 6p to lop. Since the Government pulled that out of the hat and showed that consultations with the local authority associations were meaningless, I hope they will be more meaningful about the new financial arrangements.

Mr. Cant

My statement was made merely to draw the Minister on the subject. We are in a peculiar situation, because I gather that we are to have a White Paper after the Bill or after the Act, and that is a little odd.

Quite apart from the total amount of the rate support grant, I am concerned whether the Government can devise formulae which will be subtle enough to do the new job which they are hoping to do, and have promised to do. It is wholly admirable that the bias in the rate support grant will be directed towards the cities. I say that not only because I come from a city. I believe the bias is long overdue. It is obvious that any analysis of the resources element has shown that it is defective, and one of the ways in which it is defective is that there is no way of getting a drawback from the richer authorities. I know that that is a negative way of looking at it, but it is a most important aspect. So, as the two gentlemen from Cambridge who wrote the pamphlet mentioned, local authorities with below average rateable values per head find themselves in a kind of poverty trap in that any increase in rateable value through industrial and commercial development automatically reduces pound for pound their entitlement for grant under the resources formula. Richer authorities, however, with above average rateable values, find that the provision does not operate against them.

This, therefore, will be a problem. If an adequate and effective formula can be devised by all those bright young men working away with computers in the appropriate Ministry we should welcome it. Equally, the Minister has promised that the needs element, which is in theory supposed to offset in full any deviation in demographic structure, gets away from the distortions that have arisen, because it discriminates against areas with a large number of children and in favour of areas with a high proportion of old people. That should be easier to bring about than the resources element.

The domestic element is a bit baffling. Although it appears to be something of a gesture in the interests of greater equality, it is, ironically, terribly regressive, for obvious reasons. Those unfortunate authorities which have to put on high poundages because it is a fixed amount create a situation in which the benefit to someone in a small terraced house is much less than that to someone in a higher quality home.

The problems facing local government and as outlined by my hon. Friend the Member for Small Heath are enormous. We are reaching the point now where, thank Heaven, we are rebuilding our society from the bottom. We are not so much concerned in local government terms with prestige projects. We are instead beginning to look at the basic needs—the grass roots of our local democratic community. To put this right for all the large numbers involved, to build up the bankrupt infrastructure in many cases will be enormously expensive. The Government should not listen to the clarion calls of the people who write that Tory Bible, the Economist, and put a ceiling on rates. The Government should learn the lesson from what they have been doing with prices in the nationalised industries. If it is proper to subsidise a nationalised industry to the tune of an extra £147 million merely to enable it to keep prices within the bounds of a price code they must adopt the same attitude towards local authorities. Local authorities are responsible for jobs that have to be done if the health and welfare of the community are to be sustained. I hope that the Government will make this rate support grant a large and generous one, particularly for the cities.

I had intended to say a few words about local authority borrowing but I will cut that to practically nothing. This is a matter the Government should consider. Any survey of local authority borrowing in the Euro-currency market would indicate that local authorities are borrowing on the very worst possible terms at high interest rates and that a great deal needs to be done either to put all this under the Public Works Loan Board or to arrange for open public tender.

5.59 p.m.

Mr. Charles Morrison (Devizes)

I thought that the hon. Member for Stoke-on-Trent, Central (Mr. Cant) was about to take us off on an interesting new tack and I rather regret that he did not pursue that line a little further. He has spoken with the voice of experience and a good deal of realism. When he began I thought his remarks would be a little too conservative. Of course, I agree with him that we could do with a little less change, but as he continued in his remarks I realised that he was a supporter of evolution and to that extent I can ally myself to his general approach. I think his approach was much in contrast to that of the hon. Member for Birmingham, Small Heath (Mr. Denis Howell) who I regret is not present at the moment but who seemed to be indulging in a number of imaginary revolutions.

He accused the Government of a massive retreat in respect of certain proposals on local government finance and on the recommendations of the Redcliffe-Maud report. I do not see how the Government can be accused of retreating from positions they never took up. They may not necessarily have been right not to have followed some of the recommendations in some recent reports, but they clearly cannot be accused of being wrong.

However, I thought that the hon. Member for Small Heath was right to emphasise the importance of local government, as did my right hon. and learned Friend, although I must admit that I thought my right hon. and learned Friend was not entirely successful in trying to make out that the Bill, however important it may be, was more exciting that it is. I do not consider that it can give rise to any great feeling of party evangelism. Nor is there much in it to put one into a state of political ecstasy. To be fair to it, the Bill does, amongst other things, make some sensible changes about specific grants, and it makes helpful changes in valuation and exemptions. The Bill introduces a new concept of a local government ombudsman and it is basically necessary in the light of local government reorganisation.

The Bill is a disappointment to sonic, including the hon. Member for Small Health, because it does not provide a totally new basis for local government finance.

I am sure that all my hon. Friends agree with me that it ill behoves the hon. Gentleman to criticise the system when the last Labour Government produced no alternative and when he, at the end of the day, could call only for yet another Royal Commission. The Government cannot be criticised for not introducing a radical change in the system of finance. Way back before 1964 the Labour Party was implying that it would introduce radical reform of local government finance. But time passed, and nothing happened.

If the present Government had adopted the recommendations of the Redcliffe-Maud Report, including the proposal for regional authorities—I would not have objected if they had adopted some of them—it is possible that an alternative basis for local government finance could have been designed. But the new system is a much watered-down version of Maud and there are no regional authorities. Although regional authorities are all very well in theory, they will not work out in practice in this country; because a region might make sense socially it does not necessarily make sense geographically or economically, and vice versa.

Broadly, the new local authority areas are not large enough, nor big in population, to provide a basis for an alternative form of local taxation, with a reasonably certain yield and which is reasonably cheap to administer.

The hon. Member for Small Heath suggested that there might be a system of local income tax. My view immediately is that a system of local income tax relative to its yield would be enormously expensive to administer. However, I hope that every farmer will take note of the reiteration by the Labour Party Front Bench of the proposal that agricultural buildings should be re-rated.

I believe, in spite of those remarks, that the Government can be criticised for not being a little more adventurous in the Bill. I should have liked the Government to put into the measure some discretionary powers for local authorities which they could have applied had they felt so inclined.

There are three alternatives which could have provided local authorities with means of raising money. First, there are lotteries. I was pleased to hear my right hon. Friend say that the Government are to give more thought to them. I am opposed to a national lottery. Originally I favoured such a suggestion, but I went into the question in considerable detail after the proposal for a national lottery was made by the right hon. Member for Birmingham, Stechford (Mr. Roy Jenkins) when he was Chancellor of the Exchequer. Having considered the matter in great detail, I came down strongly against the idea of a national lottery.

I am even against a county lottery. However, I should like to see the new districts have the power to hold lotteries. The relationship in a district between a lottery and its results could easily be seen. Only a limited size of project would be involved. Such a lottery at district level would be of particular relevance to recreational provision.

Secondly, if lotteries are to be limited to districts, more consideration should be given in the counties to the possibility of a discretionary hotel tax. Such a tax is quite common abroad; one runs into it in almost every country one visits. It would produce particular benefit for local areas, both from the growth of tourism and from the increase in the number of business visitors.

Thirdly—returning to the point made by the hon. Member for Small Heath—it is a pity that the opportunity provided by the Bill was not used to provide the power to allow a local fuel or petrol tax Generally, I favour a lower licence duty and more taxation on petrol, so that car owners can pay more for road use and less for garage use.

Those three ideas are by no means a comprehensive list. Undoubtedly, there are many other possibilities. I hope that the Government, having put the Bill through the House, will not consider that they have reached the end of the trail but will continue to consider possible alternatives for raising local government finance, albeit in conjunction with the rating, system.

Turning to Clause 8, I am pleased to see that there is to be a specific grant for monetary awards and grants to students. This provision will remove a major bone of contention amongst local education authorities. However, why should the specific grant be at only 90 per cent.? I echo the words of the hon. Member for Small Heath. Why should it not be at 100 per cent.? Local authorities have no discretion about mandatory grants, unlike in other spheres. Therefore, why retain a façade which implies discretion which they do not have?

Mr. George Cunningham

Does not exactly the same point apply to other expenditure falling as to about 90 per cent. on local authorities such as the cost of courts, probation services, and so on?

Mr. Morrison

I will come to that point in a few moments. I was about to say the same, but with greater emphasis, about the 90 per cent. in respect of the rent rebate scheme. There it is even more important that the grant should be 100 per cent., bearing in mind also not only that it is a statutory provision but that there is also provision within the Bill to allow a local rebate scheme to provide greater benefit than the statutory scheme. I think that as a general principle the Government should provide 100 per cent. where a local authority has no discretion but that where a local authority has discretion the total should be consolidated within the rate support grant.

Mr. David Stoddart (Swindon)

Following the hon. Gentleman's last remark, may I ask whether he agrees that this should apply also in the case of the Housing Finance Act and that, as the local authority has no discretion in the rates it charges, it should be granted 100 per cent. on that rebate?

Mr. Morrison

I am talking about the Local Government Bill and I do not want to be sidetracked into housing finance.

Clause 15, so far as it goes, is very good. It is undoubtedly an improvement on the old law, which allowed for 50 per cent. rating on unoccupied buildings. I should like to see one addition. I should like to see a discretionary provision for a really swingeing increase in rates, increasing preferably by geometrical progression, according to the time of non-occupation, of unoccupied office blocks. I make that suggestion on the basis that they should be rated in such a way after a reasonably generous time lag—say, about 12 months for new office blocks and possibly less for old ones. It is monstrous that office blocks have been constructed and in some cases, albeit in a relatively small number of cases, have remained unoccupied for a very long time.

The provisions of Clause 19 are humane and sensible and the Government are to be commended on the provision which exempts from rates certain facilities for disabled persons. Likewise, I think that Clause 20 is sensible. I was very sorry to hear the hon. Member for Small Heath carping about this, because few things have created more irration amongst householders than to find that after they have carried out some relatively minor improvements such as central heating they are immediately landed with an interim rate increase. I am very glad that this is to be rectified.

I welcome the provision for a local government ombudsman, but I hope that the local commissioners will be used sparingly, almost as a court of appeal of last resort rather than one of first resort. In the ordinary course of events the average citizen's means of redress in connection with a local government grievance should be his locally elected representative who should be perfectly capable of dealing with the vast majority of problems. If the ombudsmen are over-used, so will their bureaucracy grow and before long we shall have to have another sort of ombudsman to look into the ombudsmen.

In Part IV, I welcome Clause 34 as I would welcome any clause which removed or relaxed control over local authorities from Whitehall.

Finally, I return to the application of the rate support grant, because it has caused very great concern in rural areas, particularly, but not only, in the South-East. I believe that it has also caused a good deal of concern in certain parts of Wales. My right hon. and learned Friend said that he had warned local authorities to limit the growth in their expenditure. That is a perfectly reasonable and acceptable warning as to the future. What my right hon. and learned Friend could not do—and neither could the Government—was to encourage local authorities to increase and improve their services and then change the rate support grant practice so that some areas suffer loss of enormous and assumed allocation of grant.

It seemed that there were, in consequence, two options open to the Government. First, there was the possibility of accepting the working party proposals—which, in effect, allocate more to the conurbations and less to the rural areas—or, secondly, of retaining the old allocation arrangements, giving special aid to the conurbations. It seemed that the Government had opted for the former, and that would undoubtedly have caused a vast increase in rates, or a cut in services, or both. What my right hon. and learned Friend said about the domestic element must be studied.

In the meanwhile the Bill should be welcomed, and provided it redresses, or virtually redresses, the position it will be entirely acceptable to local authorities. Had it not been for what my right hon. and learned Friend said today, the financial outlook for local authorities, and the services they could provide, would have been bleak.

Subject to minor alterations the Bill should be supported. It will be one more means to help ensure that the new system of local government will work on oiled wheels.

6.16 p.m.

Mr. Elystan Morgan (Cardigan)

Unlike the hon. Member for Devizes (Mr. Charles Morrison), I do not consider that the Bill can be cured by minor alterations. My interest in the Bill centres on Part I, which deals with changes in the rate support grant system.

When the Bill is viewed from the perspective of a few years it will be regarded as an ill-conceived measure which failed in its basic and central purpose. It will be adjudged a failure, first because its proposals were not dealt with at the same time as the whole question of local government reorganisation was considered. It is wholly wrong that the considerations of local government boundaries and functions should be divided and divorced from the third factor, local government finance. They form an indivisible trinity, and it was unwise for the Government to deal with them in a piecemeal fashion. I go further and say that these three factors should have been dealt with in the whole context of whatever study the Government are giving to the Kilbrandon Commission's recommendations in so far as they impinge on local government reform. In any event, should there have been this indecent haste to deal with local government reform before the Kilbrandon Commission reported?

The measure has failed to go to the root of the problem of rates, and I endorse what other hon. Members from both sides have said about rates being a regressive tax. There is an ever-widening gap between the annual growth of the rate base and the rise in local government expenditure. In the past five years the rate base has grown on average at 2½ per cent. per annum, added to which there has been a growth in poundage on average of 1 per cent. per annum.

There is a wide gap between the 3½ per cent. combined figure and the average rise in local government expenditure. Any hon. Member who maintains that the average growth in local government expenditure in the next five years could be contained to within 4 per cent. a year would be regarded almost as an irresponsible optimist.

There is a great temptation to wander down some of the fascinating philosophical byways to which we have been referred in relation to alternative rates as a substantial source of local government revenue, but as I wish to deal with another aspect I must abjure that temptation. I am sorry that my hon. Friend the Member for Birmingham, Small Heath (Mr. Denis Howell) is not present. I disagree with him when he pleads that consideration be given to rerating agricultural land. That would be a certain formula for a sharper increase in the price of food than we have already seen. There is, however, one exceptional situation in which I should like to see agricultural land rerated. This is where there is an element of pure speculation in the purchase of farming land, where the genuine farmer is driven out by concerns that do not have agriculture at heart. It may well be one of the weapons that future Governments must have in their armoury to deal with this difficult problem.

Mr. Charles Morrison

I have some sympathy with the point made by the hon. Gentleman, but has he thought about how it is possible to distinguish between the genuine farmer and the speculative farmer? Nowadays many buyers of land are admittedly coming in from outside and paying high prices but are farming the land themselves.

Mr. Morgan

But many of them do not farm the land themselves. I could devise numerous formulae to distinguish, but this is not the time to do it. I hope that the opportunity will present itself before very long. The Government have gone for two years and four months since the last debate on agriculture. That is a matter that the hon. Gentleman will no doubt take up with his Front Bench.

Thirdly, the Bill deserves strong criticism on account of its timing. Despite the Secretary of State's glowing optimism, it will probably not have a swift and easy passage through Committee. It may well not return to this Chamber until next year.

Treasurers of local authorities are used to receiving the details of the central Government grants they are to receive in the following financial year not later than the end of December or the beginning of January. Clearly, that will not be possible this year. Therefore, the basis on which massive decisions are made on the expenditure of more than £3,300 million will be enshrouded in uncertainty for a long time.

In an editorial, the journal Local Government Finance said in August: It is about time the Department of the Environment and the Treasury came clean and informed all concerned as early as possible the extent of any Government assistance, either long term or transitional, to enable existing and new authorities to plan more efficiently rather than be suddenly informed at the last moment of what is to be done. We are rapidly approaching the situation when the implementation will be expected on the day before the decision or direction is given. In a way the Government have excelled that since, although we have not been told that the authorities must come to those decisions before the Bill has been passed, the White Paper, of which we had the first mention this afternoon, will not be published for a considerable time, and it may well be, therefore, that they will have to come to decisions in advance of the White Paper.

Lastly, and most substantially, the Bill will fail because it contains blatent discrimination against rural areas, many of which, even under the present system, suffer an acute deprivation. The amalgamation of local authorities next year can do nothing to reduce the sum total of an area's needs, irrespective of the number of existing local authorities amalgamated to form the new area. Nevertheless the sparsity factor, which has been very important in calculating the level of gram to be received from central Government, will be materially affected by that amalgamation. The totality of need will remain the same but the basis of calculation for the purposes of subsidisation will automatically be changed by the very fact of amalgamation.

Added to that, there is the factor of a change in the specific formulae for grant as compared with the current system. We can judge only from the best evidence that has been gleaned by local government treasurers throughout the country, which has been the basis of strong recommendations to the Department over the past few months. Let me give a few examples. The Dyfed County Council in South-West Wales is to be formed from the amalgamation of the present counties of Cardigan, Carmarthen and Pembroke. I am informed by the most reliable sources that, with regard to the sparsity factor, there will be a net loss for the new county council of no less than £1.6 million per year. The changes in formulae as compared with the criteria now extant under the Local Government Act 1966, mean a further loss of £1.2 million. If Ministers can authoritatively show those figures to be wrong and exaggerated, I shall be very happy and there will be general jubilation in the county halls concerned. But those are the calculations from the information which has been given by the Government so far.

Six of the eight new county councils in Wales will suffer substantial loss as a result of the changes we are discussing. All but South Glamorgan and West Glamorgan will be far worse off. The total net loss in the whole of Wales is calculated to be about £7.8 million a year.

Therefore, the new authorities will face an agonising choice between reducing expenditure on vital services and, in attempting to maintain the level of vital services, making a substantial increase in their rates. For Dyfed it would mean an increase of no less than 35 per cent.

Added to that, there is the curse of inflation and also the need for the general improvement of services now at a low level. Dyfed can therefore think realistically in terms of a 50 per cent. increase in its rates.

Mr. William Edwards (Merioneth)

There is an additional danger that in the sparse rural areas, many of which are among the most beautiful in the country, a poor county council will feel a great temptation to try to increase its revenue by allowing development to go ahead in national parks and areas of high natural beauty to increase its rating base.

Mr. Morgan

My hon. Friend has made a very fair point, and I am grateful to him. It would be a short-sighted policy, but the temptation is one to which people will undoubtedly succumb, because the demands for higher rates will fall upon areas with little natural growth, and where that growth takes place it does so in domestic property rather than commercial or industrial property.

The situation does not affect all authorities in the same way. There are not only losers but gainers from the new formula. It appears that by and large there is a substantial net gain to be achieved in the application of the formula to urban areas. For example, Greater Manchester could maintain its present services under the new formula, even with a drop of 11 per cent. in the rates, Merseyside could do so with a drop of 13 per cent. in the rates, South Yorkshire could do so with a drop of 6 per cent. in the rates, and the West Midlands could also do so with a drop of 5 per cent. in the rates. Therefore, if I am right in this contention—as I very much fear I am—these proposals constitute a vicious blow to local services in areas which have least capacity to raise additional revenue by way of rates.

My own constituency of Cardiganshire is an area which is isolated from the rest of the country, with poor rail and road links. It already suffers cruelly from the outward migration of the young. It is a sparsely populated area, lacking capital to introduce the dynamic of growth. It has an ageing population, a network of small roads to maintain and so on. How in the name of reason can a community such as that raise over one-third more revenue by way of rates? In Cardiganshire the income per head is among the lowest in the whole of Britain and, closely connected with that, we have the lowest percentage of insured population employed in manufacturing industry—only 9 per cent. In those circumstances, the new formula will mean either a cruel diminution in the standard of services at present provided—incomplete though they be—or a wholly intolerable additional burden upon the ratepayers of Cardiganshire.

It is right that those of us from Wales should ask: what has the Welsh Office done is this matter? Did the Secretary of State for Wales turn like a tiger upon his colleagues in the Department of the Environment when he heard of these proposals, or did he purr like an elegant Persian cat? Did he attempt to spell out to the Government the statistics of misery in relation to Wales, or has the case of the Principality gone by default? Has he made it his business to research in detail the facts relating to Wales, or has he deliberately turned a Nelsonian blind eye on to the whole situation? If he has done the latter, quite clearly he can have no claim to having properly discharged his stewardship towards Wales.

Despite the fact that in Clause 4 of the Bill there appears to be a laudable flexibility which local treasurers will enjoy vis-á-vis the Treasury which does not exist at the present moment, and despite all the euphemisms that are adopted in the consultative document in dealing with all the changes, which are described as substantial improvements to the system of Government grants", it is my contention that the purpose of Part I of the Bill is to set up machinery to rob the weak in order to sustain the strong, and that the effect over the whole of Britain will be to channel hundreds of millions of pounds away from the rural areas to the urban areas.

For decades there have been attempts by successive Governments to alleviate the problems of areas in greatest need, many of which were rural localities. This was never achieved as a complete process of equalisation. It could be only a crude form of deficiency payment, for where an area enjoyed services that were above the average it was not penalised in any way, and there was no question of levelling down to a uniform standard. The formulae were never designed to achieve specific results. The system appears to have been designed as a crude and rather homely form of horse-trading taking place every two years. No specific objective was ever spelled out in relation to the system, and no comprehensive study of it has been made by any Government.

Having decided to proceed with such vigorous haste in relation to local government reorganisation, the Government could well have paused and dealt with certain acute problems of urban need under the machinery set up for that purpose and then—I agree completely with what my hon. Friend the Member for Small Heath has said—set up a Royal Commission to deal not only with the question of alternative sources of revenue for local government but, at the same time, to make a detailed analysis of cause and effect in relation to the whole formula system as we have seen it operate over many decades. Then, armed with the full facts, the Government could have acted and shown a determination to deal with the diverse needs of various localities in a fair and equitable way.

Lest I be suspected of having a completely prejudiced and jaundiced view of the Bill, may I hasten to say that I find in it one or two matters which are perfectly palatable. It would be rather difficult for any Government to introduce a miscellaneous provisions Bill without achieving such, either by design or by accident. May I note that it appears from Clause 6 that it is the intention of the Government that more substantial funds should be directed from central Government to assist local government with transport problems in rural areas? If that is the intention, I certainly welcome it. But the drafting of Clause 6 is so imprecise as to make it impossible to arrive at any conclusion on that score. I should be grateful if the Minister would confirm that the level of grant will certainly be higher than the 50 per cent. now enjoyed, and if he would consider whether a realistic figure is of the order of at least 80 per cent. When Section 34 of the Transport Act 1968 became law, it was a very radical and progressive proposal. Since that time, however, a great deal has happened in relation to the fortunes of rural transport systems, and the bill that has to be faced by many authorities is so crippling that the situation demands a very substantial subvention from local government.

I also welcome the proposal in Clause 15 to allow local authorities to levy a 100 per cent. rate on unoccupied property. This will go some way towards solving the problem, which we find in a very acute form in rural Wales, of owners of holiday homes enjoying the occupation of a house for only two or three months in a year and then leaving the place empty and making no contribution whatever to the community. Of course the problem goes very much deeper than that, and the creation of a strong and vigorous economy is the only way of tackling the problem. It is a source of very great worry to us who live in the countryside to see the disintegration of a community in this way and to see that process subsidised out of local government finance by grants being given towards homes of this type.

Mr. James Allason (Hemel Hempstead)

Is the hon. Member suggesting that the owners of such homes should move their furniture out for the nine months of the year when they are not in them? Otherwise they will be paying rates on furnished property.

Mr. Morgan

No, it is not so simple as that. The dividing line between property which is furnished and property which is unfurnished is a pretty thin one, but I do not want to go into great detail.

I return to what I said at the beginning of my speech. Part I of the Bill is its heart and kernel, and I think that its heart is totally evil. For that reason, I urge my right hon. and hon. Friends on this side of the House to oppose it.

Mr. Oakes

Before my hon. Friend sits down, may I revert to the point about empty properties? Is it not true that many people buy second homes and leave them empty until they retire while there are people in the area badly needing homes?

Mr. Morgan

That is the case, and it is the curse of the countryside to have large numbers of properties unoccupied for most of the year.

6.40 p.m.

Mr. James Allason (Hemel Hempstead)

Although I agree that second homes in Wales may well be a curse, the hon. Member for Cardigan (Mr. Elystan Morgan) was referring to cases where houses were occupied for only three months of the year. He ought to know that in such circumstances rates are paid for the full year.

I want first to refer to the report of the Expenditure Committee, published in January of this year, dealing with urban transport. It recommended that some provision should be permitted for operating subsidies for public transport. What was intended was the redistribution of existing transport expenditure away from the provision of urban roads towards subsidising public transport. This is now permitted by Clause 6 of the Bill, where there are four heads of expenditure that are to be combined—public transport, highways, the regulation of traffic and the provision of parking space.

As I understand it, this means that there will be one grant for the four purposes and it will be left to local authorities to spend it as they wish. It will give greater discretion to local authorities, which we welcome. What is more, it will stop the feeling of local authorities that they are getting a grant for roads, that they have to spend it on roads and that they must go on developing roads in urban areas, whereas they have no grant for subsidising public transport, much as they wish to do it. The situation will change from April 1975. It is a great step forward and it is to be welcomed.

I turn now to the question of the domestic ratepayer. I have a great deal of sympathy with the speech of the hon. Member for Cardigan. We should remember that the average rate paid by the domestic ratepayer in 1951–52 was £16 8s. By 1964–65 that had about doubled to £32 8s. 5d. That represented a rise of 5½ per cent. per year at compound interest. It was a substantial sum, greater than the increase in the cost of living over that period. However, £32 a year in rates was a tolerable average.

Since then the domestic rating situation has become totally out of hand. I have the Hertfordshire figures for the last four years. In 1970–71 the average rate figure was £61.91. Hertfordshire pays slightly above the national average both in rate poundage and in rateable values. But that is still an indication of how the rate burden has increased. Much worse was to come. There was an increase in the following year of 7½ per cent. There was an increase the year after of 15 per cent. This year we have had yet another increase, this time of 13 per cent. The result is that the average rate is now just under £88.

Rate levels of this order for domestic ratepayers are quite intolerable. For that reason I welcome the generous rate rebate scheme which will affect 3 million ratepayers. But what about the other 14 million, many of whom find it a great struggle to continue to live in their homes and to pay their rates? Some of them have retired on what they thought were adequate incomes. They believed that, having worked hard all their lives, they could retire in comfort. Instead, they find life very difficult as a result of these rate increases. I am speaking now of the average person. Many people in my constituency were hit severely by the exceptional rate increases last year which were due to revaluation. They received some help from the Government. I remind the House, however, that rate increases of 30 per cent. were not exceptional.

As the hon. Member for Cardigan pointed out, the effect of the Bill is to increase the resources element and to reduce the needs element. In other words, the Bill will give further help to the cities and reduce the help given to the rural areas. The theory is that it will remove the grant from the rich rural areas and give greater help to the cities of the North.

That is not always the position. Rateable values are notoriously unreliable. In Wales, for example, they are incredibly low. Those in the South of England are substantially greater than those in the North. It has been calculated that a council house in West Sussex will pay 40 per cent. more rates than an equivalent council house in the North of England, even though its occupant receives an income which is only 10 per cent. higher. This is the great Robin Hood act of taking from the rich and giving it to the poor. The result of this Robin Hood act in Hertfordshire is that there will probably be a reduction in grant of £4 million. That represents a 10 per cent. increase on the county precept.

In addition, the county has to meet the costs of inflation, and on top of that it has to meet the cost of an expanding population, bearing in mind that Hertfordshire is expanding due to the growth of new towns. Happily the situation will be cushioned to an extent by the substantial increase in the domestic element which my right hon. and learned Friend announced today. But it will still mean that once again Hertfordshire rates will be the subject of a very substantial increase. I believe that the situation has reached the point in Hertfordshire, and, I suspect, pretty well throughout the country, where domestic ratepayers should not be asked for any more.

In 1955 there was industrial derating, and that was modified. As a consequence, for the only time since the war there was a moment when domestic rates fell. In 1956 the average rate poundage fell to 16s. 2d. from 23s. 4d. the previous year. That was a dramatic fall. It meant that rates were held down for several years by this means. Now there is no industrial derating, and that means that there is no slack to take up there.

It is possible to transfer a greater burden of the rates to commercial premises. Such premises are paying voluntarily, by an act of the market, substantial rents. We have heard of office rents as high as £10 a square foot in London. In these circumstances, commercial premises are an element which can be taxed to a greater degree. I do not know whether we can have super-rating for commercial properties, but the alternative is to have derating for industry and domestic properties. As my right hon. and learned Friend has said, for domestic rating there is an element of 20 per cent. derating payments. That is not enough. We need a substantial change.

Let us have something dramatic of the sort we had in 1956 so that rates fall. We would then have a reasonable hope of being able to afford to pay our rates. That would be a pleasant change. There is a great deal of need for rating reform, but there is no easy way of reform by lotteries or by specious alternatives. It must be by a redistribution among existing ratepayers. The domestic ratepayer cannot afford to continue with the present burden.

6.52 p.m.

Mr. David Austick (Ripon)

The subject of the debate deeply concerns almost everybody in the United Kingdom. It concerns the life of our society in such a way that even education is affected by it. As a newcomer, however, I am surprised to discover the low key in which the debate has taken place.

I was pleased to hear the interesting and even courageous contribution of the hon. Member for Harwich (Mr. Ridsdale). It seems that there is in the Bill too much too late or too little too late. Perhaps some of it is too early. In some ways I find it a dangerous Bill because of the provisions which it contains which have been delayed so long. As a member of local government in the North of England, I have been extremely concerned about the delay of certain parts of this measure. Now that the Bill is presented to us, I am equally concerned that it contains some measures which need not yet have been introduced.

As most of us know, all local authorities and their staffs are currently engaged in a heavy programme of work connected with the reorganisation of local government. That work will not be completed for many years. It is having a devastating effect on some of the services, particularly on education. That some of the measures should be introduced now, so as to make the continuation of that work difficult, is bad.

At first sight the Bill appears to be merely a sophistication of much existing legislation. However, when we look deeper there are some difficult parts of it which we should treat carefully. It seems that there are far too many provisions for items to be levied as a consequence of regulations. Clause 6 seems to be a parliamentary lawyer's dream world.

Although we might regret certain omissions, there are many provisions which are welcome. As has already been said, the Government could have introduced new sources of income. The big disadvantage of the present rating system is that it is in no way related to the change in the value of money. The Government have again missed an opportunity, despite their dislike of change, to introduce other forms of raising revenue. Despite the smokescreen raised by both Conservative and Labour Members, the Liberal Party still believes that site value rating should be considered seriously. It is important that the principles of that system of rating should be clearly understood.

There are other forms of alternative income which could be considered. We could have local income tax or a local company tax. Such taxation could form additional support for the present rating system. The hon. Member for Birmingham, Small Heath (Mr. Denis Howell) took a long time to deal with his approach to the new sources of revenue, but he did not do what was obvious: he did not suggest that there should be a supplementary form of revenue. That was mentioned by the hon. Member for Devizes (Mr. Charles Morrison).

We should not assume that we should dispense immediately with the present system of rating. We must consider a supplementary form of revenue which might eventually take over. It is to be regretted that rate relief is not yet to be completely transferred to the Treasury. Although the suggestion has been made that the local authorities would be better off with only 10 per cent to find instead of the present 25 per cent., that is misleading. I have spoken to a number of treasurers, and they think that there will be little change. Some of them feel that they will be worse off.

It is a pity that the Government have not had the courage to transfer 100 per cent. responsibility for students' grants to the Treasury as the level of grant is now mandatory. I know that many treasurers are concerned that nothing is included in Clause 2 as to how the global sum for subsidy is to be spread over the elements of need, domestic rates and resources. It is considered dangerous that that should be left to the discretion of the Secretary of State.

It must be remembered—I hope that this matter will be considered further—that any increase in the needs element could result in a decrease in the two elements granted to non-metropolitan district councils. Any substantial change from the present pattern of distribution of the global sum will adversely affect the level of rate levies. This, combined with the changes due to reorganisation, will cause consternation to ratepayers, particularly in the rural areas. It is important that rural areas should not be deprived of their financial support in order to help out urban areas. The present changes are quite unfair to sparsely populated areas. We welcome the Secretary of State's assurance about special help to hold domestic rates. We hope that his final proposals will bear out what he has suggested.

I have said that the Bill is weak. As an indication of its weakness I refer to the clause dealing with transport matters. There is no indication in the small print that greater priority will be given to public transport than will be given to provision for parking. We welcome the proposal to appoint local ombudsmen. There is no doubt that many of the frustrations with national government stem from local government level.

Complaints should be treated as being of greater importance. Liberals have long advocated the need for a proper channel of complaint and for impartial investigation of such complaints. We are sorry that there is no provision for the investigation of local authority contracts, or for commercial dealings, except in land. There is a big weakness in that the Ombudsman has no sanction other than that of publicity. This makes his job a bit of a farce.

We also welcome the new flexibility to be given to legislation concerning the rating of empty properties. This allows much more local discretion to deal with differing circumstances. This, taken together with the new method of assessing grants from central Government, will ensure that local authorities will be encouraged to maximise revenue from this source.

There is a relaxation of controls suggested in the Bill. Speaking as a councillor I can only welcome it. I know that the officers of the council on which I serve will be pleased about it. There is a clause which perhaps gives the lie to this relaxation. I refer to Clause 5(4), which suggests that the Government intend to tighten up controls by a back-door method. I am astounded that such a step could be taken without any consultation as to its implications in a Bill which professes to allow a relaxation of certain Government control over local authority services. Clause 5 (4) refers to Section 99(1) of the Education Act 1944.

The implication of a new and all-embracing control across the board, and not the mere withholding of money as is the case under the present rate support grant, is disturbing. The proposal is to extend the arrangements of Section 99(1), and it is completely unacceptable. Clause 5(4) specifically states that this section shall be applied to other matters. For all practical purposes it means that local authorities become the agents of Government Departments. Such a move could only discourage both members and officers from taking part in local government—

Mr. Graham Page

I think that I can clear up this point. There was no intention of drafting the clause to make it as extensive as the hon. Member suggests. I appreciate that it could be read as he has said, but I am assured by my parliamentary draftsmen that it would not do what the hon. Gentleman suggests it would. It applies only to Section 99 of the Education Act.

Mr. Austick

I am grateful for the manner in which the Minister has cleared up that matter. I hope this will be dealt with in Committee. Despite the assurance on that point, I still feel that the Bill is weak and will not achieve its stated objectives. For this reason, we shall support the Opposition's amendment.

7.7 p.m.

Sir Bernard Braine (Essex, South-East)

As I have some criticisms to voice, I think it would be ungenerous if I did not welcome at least some of the Bill's provisions. I am glad that part of the heavy cost of education is to be removed from local ratepayers. That is a move in the right direction, although, I agree with my hon. Friend the Member for Harwich (Mr. Ridsdale) that it does not go far enough. I am pleased too with the provisions for better rate rebates. That is good news for a large number of ratepayers on relatively low incomes.

I am glad that modest help is to be given to the disabled who, whatever their means, always live under a disadvantage of one kind or another. I am glad too that my right hon. and learned Friend the Secretary of State has met the point which I tried to make vigorously to him earlier this year about the level of statutory deductions from gross values. That will be helpful to many people on low incomes in lower-rated dwellings.

Nevertheless I beg leave to doubt that these interesting new provisions will wholly compensate for the burden which the Bill may—I say "may" deliberately—impose on ratepayers, especially in my constituency, if what is so far proposed in respect of finance is implemented. It may be that what my right hon. and learned Friend said today about an in- crease in the domestic element of rate support grant will give an encouraging measure of relief, but it is impossible for us to evaluate what such an increase will mean. My right hon. and learned Friend must not mind if we are critical of the financial implications of the Bill as they appear at the moment because he brings a Bill before us before even the treasurers of local authorities can evaluate what is proposed.

My own constituency has a direct interest in this. My right hon. and learned Friend will remember the strong protest I made in this House on 25th May about the heavy increases—increases well out of line with what was happening in a good many other parts of the country—in our rates in South-East Essex. Arising out of revaluation, Essex ratepayers as a whole suffered a loss of resources grant of some £2 million. Because valuations in the past in South-East Essex had been on the low side, a situation further distorted by the deliberate postponement of the valuation due in 1968, the increase was exceptionally heavy.

Some leveling-up was inevitable. It is only right and fair that there should have been a leveling-up and I make no complaint about that. It seemed wrong to me, however, that our ratepayers should be asked to bear the whole of the consequential increase all at once, in a year when the Government—for good reasons which I support—had imposed restraint on incomes. This is unfair. The essence of any system of taxation is that it should be fair and seen to be fair.

The least one could expect, therefore, was that care would be taken to ensure that there was no further increase in the burden during the coming year, other than perhaps some allowance for increases in costs following inflation. But what did we find? The first report of the Grants Working Group set up to consider new ways of calculating the needs and resources element of rate support grant came up with proposals which would have resulted in a probable loss of grant to Essex of £8 million to £9 million. The burden which that would have imposed would have been totally unacceptable.

The group then had a second look at the matter and came up with a revised estimate which looked like involving Essex in a loss of grant of £3 million to £4 million. This time the loss was cut by about half. Even so, coming on top of the current year's loss of resources and all the pain which this has caused to my constituents and others, this too would impose an impossible burden.

It appears that county treasurers in the Home Counties are not only critical of these latest proposals but are also utterly unconvinced so far that they have been worked out properly. What is clear is that the proposals have been rushed through—I can only go on the information at my disposal at this moment of time—without proper consideration of their effect on individual counties. The group itself recognised that the proposals were of only an interim nature.

I shall be brief, because other hon. Members wish to contribute to this important debate, but wish to make two final points. First, after the protest which I made in the House earlier this year the Government cannot expect me to support any proposals which add disproportionately and therefore unfairly to rate burdens put on my constituents. I cannot stress too strongly the fact that if people are to be expected to support the Government's prices and incomes policy and so to exercise restraint—and I go along wholly with that view—there must be restraint in the demands put upon them by rates and taxes. Accordingly, until a fairer system is worked out I would expect the Government to postpone implementation of these new proposals for at least a year. It would be possible to amend the Bill in Committee to provide for this. If there are any arguments against such a proposal I hope we shall hear them.

There would be considerable advantages in postponement. There is the negative argument that it is hardly fair to new authorities—authorities which hope to have the good will of ratepayers from the outset—to expect them to impose swingeing increases in rates. Since the ratepayers are hardly likely to see any increase in services—and in my constituency we are already beginning to burst at the seams in some of the schools—ratepayers will inevitably blame increases in rates on local government reorganisation.

Mr. Michael Shaw (Scarborough and Whitby)

Perhaps I have not followed my hon. Friend's argument, but has the committee which has studied these matters in his constituency also stated what would happen to the rate burden next year if there had been no alteration?

Sir Bernard Braine

I am afraid my hon. Friend did not pay attention to what I said. I was not talking about a committee in my constituency but about the Grants Working Group—a working party representing both the Department of the Environment and the local authority associations. That group has been hard at working devising formulae which are still inadequately grasped by local authority treasurers and which have frightened the daylights out of some of them. It may be, of course, that we are being unduly anxious on this score. Indeed, some of the things said by the Secretary of State this afternoon gave me encouragement that second thoughts are beginning to prevail. For example, there was my right hon. Friend's announcement of an increase in the domestic resources grant. I was delighted to hear that, but the fact remains that the Bill is before us without our yet having all the facts upon which to base a proper judgment. In any event, why not start with a fresh system when the new transportation grants are introduced—not on 1st April next year but 1st April 1975.

Another strong argument for postponement is that it is surely wrong to implement these proposals without first weighing carefully the possibility of going much further than my right hon. Friend seems prepared to go in relieving local government of the need to finance whole services or substantial parts of them—as my hon. Friend and I suggest in our amendment—or in raising more revenue by entirely new methods, or both.

I come now to my second point. I was truly astonished to learn a few days ago that the working group's proposals—which will provide the basis for any order made under the Bill—have made no allowance whatsoever for the additional cost of providing services in those counties that border on London and the need for ample cushioning arrangements which will minimise the loss of grant to losing authorities compared with that which they would have received by the application of the existing grant formulae to the new authorities. It is as though some arbitrary decision has been taken on the line that where Greater London ends and one crosses the border one is in rural Essex, rural Hertfordshire or rural Surrey. But a stranger to London—say, a visitor from the North—would not know when he passed from Greater London into neighbouring Essex, Hertfordshire or Surrey.

These counties have metropolitan areas, with all the problems and difficulties that these bring. Thus, I should like a firm assurance that this anomalous and unfair situation will be reconsidered before the Bill makes any further progress. Indeed, there can be no question of my voting for any order made under the Bill until we have full and adequate assurances that our special problems in Essex—which I believe are shared by Hertfordshire, Surrey and other counties round London—are recognised and taken fully into account.

Several hon. Members have stressed how little time has been left before the Bill becomes operative. At present, county treasurers do not know where they stand. I hope that my right hon. Friend the Minister for Local Government and Development, when replying to the debate, will say something about the timetable and will tell the House how the negotiations are proceeding. I appreciate that he will not be able to tell us everything, but I hope that he will be able to reassure worried county treasurers that the system to be imposed will be fair and just. I sense that this debate will have marvellously concentrated my right hon. Friend's mind and that he will now move with the utmost speed and explain these matters with the utmost clarity.

7.20 p.m.

Mr. Kenneth Marks (Manchester, Gorton)

It is a scandal that the House should have to discuss the Bill at this stage in this parliamentary Session. It could and should have been introduced last year or even the year before. The hands of hon. Members are tied by the timing of the Bill. While we may speak about it now and oppose it at length in Committee, as we should, and put forward various alternatives, the local authorities will find themselves in an even worse state than they are now.

The Opposition's amendment rightly condemns the Bill for not making provision for additional sources of local government finance other than the rating system. I should have preferred systems instead of rates rather than in addition to rates.

In their consultation paper the Government state in paragraph 2: The Government believe that the public would not welcome, at the present time of price and pay restrictions, the introduction of additional new taxes locally. What public are we talking about? Have the public been asked whether they would rather have rates or a tax based on income, wealth, or something like that? What public do the Government mean? I suspect that it is those who would perhaps pay more under a different system.

Why did we have a consultation paper instead of a White Paper? This is an important Bill on local government finance. Local government rates, as we have been told, collect about £2,400 million a year, and a Government grant of £3,000 million is added to that. This is a tremendously important Bill. Yet, instead of a White Paper giving the Government's intentions for discussion in this House, in the Press and everywhere else, a consultation paper goes out to local authorities and others. That was not good enough either.

The consultation paper states in paragraph 4: The Government's proposals are intended to achieve two principal objectives. The first is to share the cost of local services fairly, both among individual local inhabitants having regard to their relative ability to pay and also between the general taxpayers and the local ratepayers. Neither the Bill nor the rating system does anything of the kind.

The Government talk about the public not wanting change at this time, but in the middle of a freeze they brought in revaluation of rateable values so that some people had considerable increases in rates. Now they say that it is a bad time for change.

The Government have again got themselves into a mess. There was the mess on revaluation coming at a time of freeze. There was the mess caused by the Government's statement that they would monitor the estimates of the various local authorities to ensure that they did not increase them too much. Twelve men in Whitehall or Marsham Street were given the job of monitoring thousands of rates for local authorities. Now there is an even bigger mess because the Government have introduced a Bill which should have been brought in a long time ago.

There has been a mild defence of the rating system by my hon. Friend the Member for Stoke-on-Trent, Central (Mr. Cant). It has one objective, I suppose: that it is easy to collect. It probably costs less to collect than any other form of tax. However, it is a most regressive tax. The poor pay more in proportion to their income than in any other tax. It is unfair in that respect.

Rate rebates, although they help the people at the lower end of the scale, do not solve the problem. Figures were given for a man and wife and two children with an income of £18 or £26 a week. They will get some help. However, it does not alter the totally regressive nature of rates. If we are to alter the system we need a sliding scale through the income levels for rate rebates. However, that would involve a tremendous amount of administration by local authorities and this cost would add something to the rates.

The Secretary of State said that compared with the 800,000 people now in receipt of rate rebates there would be 3 million in future. He did not say how many of those 3 million are already on supplementary benefit and to whom this will make no difference whatever. The only change, if the Bill is accurate and the system comes forward, will be that money given by the Supplementary Benefits Commission will be transferred to the local authorities. They will get 90 per cent. of it back, but the other 10 per cent. will go on to the rates. I suspect that a large proportion of those 3 million will be people who are at present receiving supplementary benefits.

There are alternatives to rates. I tire of hearing Ministers in successive Governments say that things are administratively impossible. They used to say that about annual reviews of pensions. I believe that it is administratively possible to base the collection of tax, where we now have rates, on income or on wealth. That, combined with a system of Government grants, would be fair and would give local authorities the money they need.

It is not only the rating system which is a nonsense. The system of valuation is sheer mumbo-jumbo. One has a hypothetical rent. Somebody has to decide what the rent of a house would be in a hypothetical market with hypothetical tenants and landlords. At the last revaluation the local valuation court used my house as an example to prove its case. It produced the rents of three houses which were said to be comparable with mine. In an area of Greater Manchester where there are a million houses, only three houses were chosen to give the rental figure. Actually eight houses were included on the form sent to me, but five were discounted after the court decided what the rateable value for my house should be. We had an argument whether my house should be assessed at 2s. 4½d. or 2s. 5½d. per square foot. There was a complete lack of rent evidence then as there is now. Increasing numbers of houses are being built for sale and increasing numbers of rented houses are going over to owner-occupation. To attempt to use a rented system to assess what people should pay for the services they get from a local authority is nonsense.

If a householder objects, he can talk about the matter to the local valuation officer and if, in that officer's view, the householder has a good case, it does not need to go before the valuation panel. This is not only unfair but is inaccurate and a very poor system on which to base the collection of so much money.

If we are to continue with rating, capital value would be a more accurate system because it could be changed more often than every five years. Indeed, if it were based on the capital value of a house, it could be left almost to self-assessment because people would say what the value of a house was.

The system proposed in the Bill will continue the procedure of rate support grant negotiations. These are often more secret than even anything at the Ministry of Defence. Parliament knows nothing of what goes on anywhere. Individuals may know—for example, the treasurer in a town who may be representing the local authority association in discussions—but local authorities as a whole do not have a clue what is going on in these negotiations any more than do Members of Parliament. This is called open government. No doubt in December we shall get a piece of paper with a formula, 0.75p or whatever it may be for all children between 5 and 15 years of age, and half a day to discuss it in Parliament. Public finance to the extent of £5,000 million will be discussed for only half a day in this House.

I welcome the additional help which the Government say they will give to the cities and hard-pressed urban areas. I do not know precisely how they will go about doing that, or how much help they will provide, but, having on a number of occasions suggested that the rate support grant system was anomalous and unfair to the cities, I am glad to see that my plea has finally borne some fruit.

There are worries about the establishment of local government commissioners. Most hon. Members will welcome these appointments, because many people regard their Member of Parliament as their ombudsman and the present system is not always satisfactory. Complaints to the Parliamentary Commissioner go through Members of Parliament. It is proposed that in future councillors should have a similar function, but I do not think that Members of Parliament and councillors have the same functions.

More than 500 Members of Parliament are not involved with Government Departments concerned with complaints. Only about 100 Ministers are directly concerned as representing Departments. The set-up in local government is different, because every councillor is in some way directly involved with one or more committees of the local council. It will not be satisfactory to the general public if complaints go only through councillors.

Mr. Graham Page

I think that I can correct the hon. Gentleman. The complaint should go through the councillor first, but Clause 25 provides that, if the councillor fails to put the complaint to the ombudsman, it can be put to him by anybody, including a Member of Parliament.

Mr. Marks

I am glad to hear that. If there is to be a system of complaining to somebody about faulty administration, the person making the complaint ought to be able to go direct to the appropriate authority. There must be a much broader scheme of district officers, unconnected with both local and national Government, to whom people can go with their complaints and grumbles and even if they wish only to make inquiries.

Criticism has been made of the fact that some of the new local authorities may find that they are increasing their expenditure compared with that spent by the old authorities. In some cases that will be inevitable. From April 1974 my constituency will be partly in the city of Manchester and partly in the new district of Tameside. The changeover will make little difference in Manchester. The Lord Mayor will put on his other hat and become chairman of the district council, and there will be little change for the other councillors.

In Tameside, however, nine local authorities will combine. None of these is a major authority. They are all subsidiary authorities to Lancashire and Cheshire County Councils, and it will be extremely difficult and expensive for them to have a set-up comparable to that in Manchester. I hope that, whatever thoughts the Minister has in mind for future negotiations, he will pay heed to the needs of authorities faced with that kind of problem.

7.34 p.m.

Mr. Michael Shaw (Scarborough and Whitby)

I was greatly interested to hear the hon. Member for Manchester, Gorton (Mr. Marks) talk about the commission, or what one might call the local ombudsman. In many ways I share with the hon. Gentleman misgivings about the new commission. I agree with him that the position of councillors is different from that of Members of Parliament and that putting a complaint to a councillor is very different from putting one to a Member of Parliament.

My hon. Friend the Member for Devizes (Mr. Charles Morrison) hopes that the services of the commission will be used sparingly. I believe that its services will be used a great deal, and probably far too much. One of the difficulties and embarrassments confronting councillors, because they will have no alternative as it will become known if they refuse to send on a complaint, is that they will become something of a post office. They will receive complaints and they will have to pass them on.

I am not sure that there is any real virtue in that, in the average case. In some cases there will be, but in most cases it would be better if the complaint were made direct by the complainant. He can take the matter up with his councillor, who can himself complain to the ombudsman in suitable cases, but I think that this service will prove very different from what we have nationally.

The hon. Member for Birmingham, Small Heath (Mr. Denis Howell) said that there was a need for new and adventurous thinking. I agree with that, but the overall need is for some helpful action and that is what the Bill is rightly all about. The hon. Gentleman and my hon. Friend the Member for Harwich (Mr. Ridsdale) think that we should reform local government taxation before reforming local government itself. I cannot agree with that. To do that would be to do things the wrong way round. Until the local organisation is set up it is not possible to study in detail the type of tax system that is most suited to it.

For many years I have taken an interest in and been an advocate of change in our local taxation system. Indeed I have advocated a change in our whole taxation system, both local and national. Many years ago at a Conservative Party Conference held at Llandudno—the fact that it was held there shows how long ago it was—I moved a motion and mentioned a strange new tax called VAT—it is not so strange today.

Rates are an old form of taxation. They are easy to administer and they are certain in their incidence. In addition, they are cheap to collect. I believe, therefore, that we should be very careful before considering abolishing them. But they are regressive, as has been said today, and their burden often has little relationship to the ability to pay. Nevertheless, because of their ease and cheapness of collection, because they are understood and because the machinery for their assessment is in operation, the rating system must be continued as the main form of local taxation.

However, having said that I fully accept that the level at which rates are levied must be limited, otherwise the unfairness of the system becomes intolerable. I believe that that has been accepted in the debate, and that leaves us with the problem of where the extra money comes from if the amount which we can draw by rates is limited. Instinctively we look—as the Opposition amendment has looked—for a tax that can be administered by local authorities and is linked, as rates are not linked, with consumption or income, or with both. In other words, we look for a tax with a built-in growth factor that makes the collection of tax so much easier. But the more that one examines the problem the more difficult it becomes to choose a system, other than rates, that is really suitable.

There are varying systems of local taxation abroad. The systems which I have looked at have been in America. But as one examines these systems one finds borne in on one that there are great differences in the circumstances in America and in Britain. The main difference is the density of population in Britain and the interdependence of one area on another. We are, indeed, one community, one nation. I believe that it is on this matter that the people who want to hack our country about are going wrong. We are very interdependent. There is tremendous movement in this country, with people living in one area and working in another. This occurs wherever one fixes the boundaries. There are special difficulties in finding an appropriate form for new local taxation in Britain, yet the new authorities begin to function next April.

I do not believe that it is right to try to delay the Bill. But it is both needful and appropriate that the means by which the new authorities are to finance their activities should be examined and defined. In the Bill it has been decided to develop the existing local rating system together with the methods of grant aid from the centre to support it and, perhaps most important of all, to curb as many as possible of the injustices that are inherent in that rating system.

I was glad to hear the Minister say at the outset that he did not regard the Bill as the final answer to local government finance. Had he not said that I would have urged it upon him. In its approach the Bill is appropriate to the present time. No one has yet made a case for any new tax that can be locally administered. It was interesting to note that, although the hon. Member for Gorton said that there should be an alternative form of tax, he did not spell out in the slightest way what that alternative should be.

Mr. Raison

My hon. Friend will agree that it was also interesting to note that the Opposition spokesman said that the answer was to set up a Royal Commission. That would have the advantage of deferring the issue for several years.

Mr. Shaw

I am grateful to my hon. Friend. The hon. Member for Small Heath did say that, and he recommended that a whole list of proposals should be put to that Royal Commission. When listing most of the proposals, the hon. Gentleman said that he personally did not agree with them. Therefore, we can see that there are serious difficulties in finding another tax.

There is a further factor. There is an overwhelming argument at present for having no further new taxes. We are in the middle of the biggest upheaval in local government in modern times. We are also in the middle of changes in the national taxation system, with more to come. The time has come when the new authorities should be allowed, as far as possible, to sort out their new arrangements and to get their organisations working properly and efficiently. It is a time not for new taxes but for taxes which we know and understand. The task of the newly elected members of the authorities and their appointed staff must be to get the new organisations working smoothly and efficiently, without the worry and the added burden of trying to work a new tax. While, in theory, the public may agree to changes, the fact is that whilst those changes are being put into practice they are bound to be unpopular and to create uncertainty. Only when changes have become settled in and a part of life are they accepted and taken for granted.

I welcome the Bill's two main points. I welcome the easing of the education burden. In the years to come national Government may well take over more and more of the education burden, which is by far the biggest element in the expenses of local authorities. It is right that we, nationally, should take over 90 per cent. of the university and teacher- training awards. I agree with earlier speakers in the debate that there is a case for taking them over altogether.

I should like to tell my hon. Friend the Member for Essex, South-East (Sir Bernard Braine) that in the Scarborough area the proposals for the rate rebates are welcomed. My hon. Friend probably has good grounds for fears in his area, but those are not at present shared by my local authority. On the subject of rebates, the Government have not yet received the credit that they deserve for their fair rent schemes, which are far more widely appreciated than has been fully disclosed.

Mr. Neil McBride (Swansea, East)

Would the hon. Gentleman say, for example, that tenants of corporation houses who have had a lodger but who do not now have a lodger should be condemned as they are, to pay the lodger charge until the final progression towards fair rent? It is iniquitous.

Mr. Shaw

If their income is increased, that should be taken into account. But in my constituency many families have benefited from the rent rebate and allowance scheme and I am sure that they will also benefit from the new rate rebate scheme contained in the Bill.

The chief fears that have been aroused on publication of the Bill have been taken care of by the proposed domestic derating. Although the rebate system will help those on the lowest incomes, one must always remember, particularly if representing a seat such as Scarborough, that there are many people who have retired from good jobs, who have saved up over the years and who have established a standard of living in their retirement that is adequate for their needs but leaves little extra for emergencies. Any sudden increase—in rates, for example—can cause real hardship to their plan of living. Therefore, the effort that is being made by the Government, producing a minimum—I think that that was the phrase used by the Minister—of 10p in the pound and an average of a 20 per cent. derating, will be of real assistance to them.

I hope that the Government will confirm that when the new authorities are established the Government will look at this matter again and, if necessary continually, to see whether, in the light of experience, new and helpful taxes can be introduced under the administration of and for the benefit of the local authorities. For the time being, I believe that the Bill is both necessary and desirable.

7.51 p.m.

Mr. James Wellbeloved (Erith and Crayford)

I believe that before embarking upon a Bill to alter the rate support grant we should have had the benefit of a careful and up-to-date review of the alternative means of raising local revenue. I fully support, therefore, the suggestion of my hon. Friend the Member for Birmingham, Small Heath (Mr. Denis Howell) for a Royal Commission to examine the various proposals so far. My hon. Friend the Member for Manchester, Gorton (Mr. Marks) mentioned but one—the transfer of capital values.

I wish to deal briefly with the impact of the Bill on the citizens of Greater London. It is of no help whatever to these hard-pressed ratepayers. In fact, it will make what is a most difficult situation almost a desperate one for London borough councils and the Greater London Council. The resources element in the grant will still be based on rateable values. That is a grave injustice to the people of London, because rateable values there are much higher than elsewhere. That means that, on average, these ratepayers pay about 50 per cent. more than other ratepayers. Therefore, we in London have a particular grudge against the Government for not having seized the opportunity of taking radical action to change that unfair position. No doubt some of my hon. Friends who may serve on the Standing Committee on the Bill will want to put down amendments to deal with the situation.

The other unfairness for London is that in the rate support grant formula is an element that covers the extra burden that London has to bear. I believe that the GLC gets about £9 million in grant under that heading, but all that is to be wiped out because that element in the formula—

Mr. Graham Page

indicated dissent.

Mr. Wellbeloved

I am glad to see the Minister shaking his head. It only goes to show how badly drafted the Bill is. Eminent people in London who have studied it and claim to have been consulted about it advise me that London will lose the £9 million. I have no doubt that when the Minister concludes the debate he will deal with this point.

There should be proposals in the Bill to introduce flexibility for London to raise revenue. London is a centre of attraction for enormous numbers of overseas visitors. Ten years ago the number was about 1 million a year; the number has climbed to nearly 8 million, and the forecast is that within 10 years it will approach 20 million. It is only right that this great heart of Britain, a world centre in many respects, a place with a system of Parliament that has been the forerunner of many other such systems throughout the world, should be the Mecca for visitors from abroad.

We in London welcome visitors, but we do not see why we, as ratepayers, should have to bear the burdens imposed by the benefits conferred upon tourists who wish to visit the city of modern civilisation. Therefore, we should like to see authorities like the GLC given the power to impose a tourist tax. That would be one way of raising the revenue necessary to deal with problems created by tourism.

One example is the desperate need of London's housing. Many sites in London which could be used for housing development are instead being acquired for hotel accommodation for tourists from abroad. This fact affects our ability to provide homes for Londoners. It is necessarly only to peep outside the Chamber at the traffic roaring round Parliament Square and the vast numbers of coaches carrying tourists during winter and summer, to see this Palace and Westminster Abbey. The cost of all this, both in frayed nerves for Londoners and in maintaining London's road system, is enormous.

On these grounds alone it is right that we should have an opportunity to recoup some of these vast extra costs from the people who create that burden for London. It has been calculated that if the GLC imposed a tourist tax at the rate of £100 per annum per hotel bed it would raise about £6 million a year. That would by no means even begin to meet the extra costs involved but it would be a start in the use of locally-raised revenue to meet a particular local situation. It would go some little way to allowing the GLC to redress some of the anomalies that London ratepayers have to tolerate because of the unfair rating system upon which local revenue raising is based.

I shall vote against the Bill, in spite of those parts in it with which I agree such as the local ombudsman, because on behalf of the people of London we have a duty to register the most vigorous protest at the Government's failure to seize the opportunity to assist the hard-pressed ratepayers of this city.

8.0 p.m.

Mr. Sydney Chapman (Birmingham, Handsworth)

I believe, as I am sure do many hon. Members on both sides of the House, that the rating system is illogical, unfair and out of date. It is illogical because families do not necessarily pay for the services that they use. It is unfair because people do not pay according to their means, except very roughly and very indirectly. It is out of date because about 60 per cent. of local authority revenue comes from the central Exchequer.

I fear that successive Governments have used the last point to reinforce the inadequacies of the first two—the unfairness and the illogicality. There have been changes, such as the domestic rate relief for those with low incomes, and I welcome the extra provisions being made to extend that. But the old adage is still as true today, that "Taxes are paid in sorrow and rates in anger". It is true also to say that taxes levied on the domestic hereditament are the taxes which cause most bitterness, not because of the amount that people pay but because the people who pay genuinely feel that others far better off do not pay the taxes at all. As long as that situation exists we must accept that the rating system is wrong.

I recognise—the point was touched upon by my hon. Friend the Member for Scarborough and Whitby (Mr. Michael Shaw)—that the rate call is pretty substantial. It is about £2,250 million. That was last year's figure, and that income is exceeded only by the revenue from income tax and, doubtless, the expected yield from the new VAT. I was delighted to hear my right hon. and learned Friend, in his opening speech, admit what everybody knows—that the rating system is a regressive form of taxation. It was introduced at a time when the ownership of real estate was an outward and visible sign of wealth. That is no longer necessarily the case today.

However sophisticated the rating system, the fact remains that there are about 9 million wage and salary earners who do not pay the tax directly. That surely proves the point that the tax is unfair. Hon. Members have talked of the need to replace the rating system, but nobody has put forward a positive suggestion. I should like to sketch in one or two guidelines as to how the Government should act in replacing this tax as soon as practicable. First, it is well to remember that about half of the rate call comes from the tax on domestic hereditaments. Last year, in England and Wales, £1,200 million was raised on domestic rates. Therefore, the Government will have to consider how that £1,200 million—obviously more this year—will be replaced.

If it were to be replaced solely by income tax it would involve, by my calculations, an increase on the standard rate of about 7p in the pound. If it were replaced by a form of sales tax—say, a surcharge on VAT—it would mean the rate on VAT being increased from 10 per cent. to about 17 per cent.

Perhaps the logical and obvious answer is that the domestic rate system should be replaced by a combination of a surcharge on the standard rate of income tax—which would be a local income tax—of 2½p to 3p, or possibly 4p in the pound, the remainder being replaced by a surcharge on VAT, or a new form of sales tax on those items which are not at the moment taxed. I give one or two examples; I do not suggest that these should be used. If we were to increase tax by a penny a gallon of petrol it could raise another £57 million; if we were to tax a pint of beer by a penny more it would bring in £88 million; if we were to increase the tax on wines and spirits by 10 per cent. it would bring in about £50 million. If we were to restore the tax which in the last Budget was removed from such things as confectionery, sweets, potato crisps and minerals—an action which doubtless delighted children but was greatly to the chagrin of dentists—it would yield £110 million. It should be a combination of these things.

The tax that replaces the domestic element in the rating system should be collected by the Inland Revenue or the Customs and Excise as appropriate. The greatest complaint about that is that people would say that it would not empower local authorities to raise the money themselves. My answer to that is that local authorities have precious little scope for doing that now. After all, the whole purpose of the rate support grant is to back up the poorer local authorities at the expense of the richer. It will not go unobserved by hon. Members that if the domestic element in the rating system is abolished some of the poorer local authorities will become relatively richer. Examples are the great industrial areas. In any case, the rate support grant is adjusted to take such matters into consideration.

A number of times during the last three years I have congratulated the Government on their great fiscal innovations—the promised introduction of the tax credit system, the replacing of the old purchase tax and selective employment tax by value added tax, and the unified system of income tax and surtax. I greatly hope that my right hon. and learned Friend and his colleagues will feel that, in time, they must move over to the replacement of at least the domestic part of the rating system.

That apart, and because the Government are not to do that now, obviously I welcome the Bill. I believe that my right hon. and learned Friend and his colleagues have tried to abolish some of the iniquities in the present system. I speak particularly of the large cities whose populations have been decanted into the suburbs and which have done badly out of the present method of calculating the rate support grant because of their consequent decrease in populations and involvement in such environmental activities as slum clearance.

I greatly welcome the institution of the local commissioner. I hope that my right hon. Friend the Minister for Local Government and Development will confirm that a member of the public will be able to take a complaint against his local authority direct to his Member of Parliament, who will be able to put it before the local commissioner, rather than the individual having to do so through a local councillor.

I particularly welcome the increased help in domestic rate relief. I note that 3 million householders will be able to qualify for this instead of the existing 800,000.

I should like the domestic rating system to be abolished. If this cannot be done, then I welcome this Bill and give it my support.

8.13 p.m.

Mr. Arthur Blenkinsop (South Shields)

The hon. Member for Binning-ham, Handsworth (Mr. Sydney Chapman) is one of the few hon. Members who have attempted to propose alternatives to the present rating system. Everyone finds it easy to condemn the system as inequitable and unfair but it is much less easy to suggest alternatives that would be no less unfair in their incidence. Even the alternatives proposed by the hon. Gentleman would, on closer examination in detail, be seen to benefit the richer areas more than the poorer areas.

Any alternative proposals for raising revenue would be more sensibly based had we regional rather than the present local authority areas. Had we gone forward with proposals for a regionally elected body, which is what I believe we shall come to in the long term, it would have been much easier to think of alternative sources of revenue.

I share the sorrow and dissatisfaction that has been expressed with the inadequacy of the proposals in the Bill. Without going into the details, I shall seek to study the implications of the proposals with regard to the national parks and the countryside.

The Bill will replace specific grants that have been available up to now for the support of projects within national parks. First, under Clause 7 supplementary grants in respect of the county's estimated expenditure on national parks are to be met, to some extent at any rate, out of national funds. We welcome this provision so far as it goes, particularly if our understanding is correct that it is meant, in future, to cover the administrative expenses of the separate national parks that have not in the past been so covered.

Everything will depend upon the size of the supplementary grants. Many of us fear, particularly because of the rumours of cut-back in local Government expenditure, that we shall face not new revenues but a reduction of the miserably small amounts that have so far been available to national parks. We should welcome an indication from the Minister that it is intended that the national parks will be able effectively to develop their own administration. In this area, relatively small sums can produce tangible and valuable results. We hope that the national parks will not be afflicted by the overall cutting back on local Government expenditure which may ensue in other respects.

I hope that before we go into Committee we shall be told what proportion of the expenditure is likely to be met from central funds.

Clause 9 contains a new provision which I welcome in its broad intent, under which the Countryside Commission will have funds for certain expenditure within and outside national parks—for example, for projects such as country park provision. Long-distance footpaths may be covered. As for many years I have urged that there should be such independent provision for the Countryside Commission I shall be the last to criticise it when it is conceded. Whether this will be valuable depends entirely on what scale of provision is intended. Will this really have any useful contribution? When I intervened earlier, I was glad to have the Minister's assurance that it was not merely a cosmetic but was meant to make a valuable contribution towards national park work. More detailed assurances, and an indication of the way in which this provision will operate, will be most valuable when we consider the Bill in Committee.

A number of my hon. Friends are concerned about the implications of some of the other provisions of the Bill, particularly those in Schedule 6, which appear to do away with the default powers which the Minister has had in the past for use when national park authorities—local authorities in this case—have not carried out certain work. There was a provision, whether used or not, which enabled the Minister to act in matters regarding access land, provision of long-distance and other footpaths, and many other valuable and useful provisions. The fact that the power existed was of real value. Now this power is being swept away, and I wonder whether that is right.

I understand that the Minister's intention is to ensure that local authorities should have the widest independent power in this matter, but we are concerned here largely with national parks, the very name of which makes clear that they are not local, although some local interest is involved. They are areas of such special significance that we have insisted that they should have special national provision and, therefore, the Minister's default powers should, in all probability, be retained. These matters will be considered in Committee. Many matters are involved, on which it would be valuable if the Minister could make detailed explanations before the Committee stage.

Many hon. Members, including some of my hon. Friends, have indicated that they fear that if even further central funds are to be made available for local government work, local government will become the servile creature of central Government. I do not believe that for a minute. We have to accept the need for further central Government provision, particularly in education. I do not believe that it means that local authorities will lose any of their independence.

8.19 p.m.

Mr. Timothy Raison (Aylesbury)

I cannot match the expertise of the hon. Member for South Shields (Mr. Blenkinsop) in the subject on which he has concentrated, and so I shall not speak on the same matters. Hon. Members know that he speaks with a unique authority on them, and it would be impertinent of me to try to do so.

It has been suggested a number of times that there is a need for a big new inquiry by a Royal Commission into the way in which local government should be financed. I understand why people have suggested it, for genuine reasons, but I suspect that by now we have reached a stage when we roughly know what the options are and we lack either the courage to plump for one or other or a certainty that the new schemes are better than the existing scheme, however fallible it is. The issue is one of political decision and courage rather than the need for a great deal more research and examination.

My hon. Friend the Member for Birmingham, Handsworth (Mr. Sydney Chapman) probably hit the nail on the head when he said that if we are worried, as we are bound to be, by the increasing burden that rates impose, and by the fact that rates are a regressive tax which falls more heavily on some than on others, the right and easy answer—easy answers are not always wrong—is to increase the proportion of local expenditure paid for by central Government and raised through the ordinary tax system. We may argue about whether the money should be raised through direct taxation, expenditure taxes or anything else, but the possibilities exist. Rather than embark on a reform about which nobody on the evidence of today's debate, has particular confidence, we should be prepared to consider saying that over the years a higher proportion of local government expenditure will almost inevitably come from central Government sources.

I want to refer briefly to the rate support grant system as it is set out in the first part of the Bill, in particular in Clause 2, and in Clause 3, which describes the procedure for implementing the proposed system through rate support grant orders. The Bill maintains something that has been a feature of local government finance for some time, in that there will continue to be the needs element, the domestic element and the resources element. People may grumble about the way in which local taxation works now, but I do not think there has been serious criticism of the existence of those three elements. The issue is not so much whether they should exist as what the balance between them in the total scheme of rate support should be.

I preface what I have to say about Buckinghamshire by saying that I do not quarrel with the idea that as a nation we need to allocate a higher proportion of our national resources to the hard-pressed inner city areas and the other areas of urban stress. I took part in the debate on the Gracious Speech and spoke on the day allocated to discussion of the problem of urban stress, when I said that it was a matter of major national priority. I am sure that that is so. If, however, we are to have a rating system that is seen to be fair and generally acceptable, it is vital that when the Secretary of State makes the orders which he will be empowered to make under Clause 3 he should pay close attention to particular cases of hardship and anomalies.

The Secretary of State should also accept a principle that has been challenged recently: that while declining areas certainly need extra help—I do not dispute that—so also do growing areas. There seems to be a disposition to say that areas where the population is increasing rapidly should be left to a greater extent to look after themselves and should not qualify for extra provision to help them through. There is manifest nonsense about that. When an area's population is growing rapidly, it is necessary at certain points to over-provide to allow scope for the increasing growth, and everything starts from scratch. By and large, the area does not have the existing plant to work with but must create new plant, new schools and so on. Therefore, there is a strong case for not forgetting the growing areas in our concern about the declining areas.

I was encouraged that my right hon. and learned Friend the Secretary of State implied in his speech that when the orders are made under Clause 3, defining the way in which the rate support grant is to operate, the domestic element will receive some form of additional support, and that domestic ratepayers will not suffer under the new dispensation. I hope that when he replies my right hon. Friend the Minister will be able, first, to confirm that that was what the Secretary of State said and, secondly, to elucidate the matter a little further. This issue is causing the gravest concern in my constituency and in the county of Buckingham, and I hope to show that that concern has a good deal of justification.

It is difficult to argue one's case in great detail when working only on hypotheses, but we have a certain amount of evidence of what has until recently apparently been envisaged as the sort of allocation that we might expect when the new rate support grant is set out under Clause 3. A grants working group has been working for the Department of the Environment—I am not sure whether it is part of the Department or whether it has simply been convened by the Department—and has made proposals about how the rate support grant might be allocated between the three ingredients which make it up.

It appears that the line of thinking is that the needs element in the rate support grant, which is overwhelmingly the largest element, would tend to fall and that the resources element would rise very substantially. There is broad sense in this, the point being that the resources of the inner city areas tend to be flimsy and weak compared with other parts of the country and that, if we are trying to operate a system of giving greater strength to the inner city areas, it is right that the resources element should increase. That is a plausible line of approach.

Incidentally, if the thinking of the working group reflects official opinion, those Labour Members who have argued that the Bill does nothing for the inner cities are not being fair. I agree that we cannot tell until we have seen how the rate support grant is worked out, but to say that the Bill is not capable of being of use to the inner city areas is unfair.

The working group recommended that the resources element should more than double—in other words, that it should increase from 13.3 per cent. to 27½ per cent., which is a substantial increase. Taking the impact of this in Buckinghamshire and, for convenience, changing the 27½ per cent. to 25 per cent., it means that the county as a whole would suffer a loss of 14.3 per cent. of its current grant, which is equivalent to £3.2 million, or a 4½p rate. That is a substantial burden to carry.

But Buckinghamshire is threatened not only with that burden but by the fact that it is losing its southernmost part, particularly the town of Slough. Slough arouses a certain amount of controversy. If I were John Betjeman, I suppose I would continue the verse which he wrote some years ago and would say "Good riddance to Slough". The House will recall that he wrote a poem which read Come, friendly bombs, and fall on Slough". However, he was not, I think, a ratepayer and would not be affected in the way in which ratepayers in the rest of Buckinghamshire will be affected.

Slough, as a booming industrial town, contributes very substantially to the resources of Buckinghamshire. The effect of losing Slough will be to reduce the rateable value of the county by 24 per cent. but the population by only 18 per cent. In other words, by losing Slough all Buckinghamshire will be left substantially worse off. The effect of that is held to be equivalent to requiring a 10 per cent. increase to offset it, or a 3p rate. This, on top of other hardship which we face, adds up to a very substantial increase indeed in the rate burden that is likely to face the county.

I think I am right in saying that only a handful of other counties face a similar problem, due to loss of a substantial part of their existing territory. As I recall it, the other counties are Somerset, Warwickshire and Northumberland. These counties, together with Buckinghamshire, have a very special claim to sympathetic consideration from my right hon. Friend when the rate support grant system is put forward. The two factors which I have mentioned add up to something like a 25 per cent. increase in the county rate, regardless of the increases that have to take place in order to cope with rising costs and so on.

It must also be remembered that the system does far too little to take account of growing population, because the position in Buckinghamshire is that on the one hand we are losing the industrial riches of Slough but on the other hand we are seeing the growth of Milton Keynes new town. It is quite true that, in the fullness of time, Milton Keynes new town will add very positively to the wealth of the county and will no doubt make an enormous improvement to our situation. It is equally true, however, that at the present stage Milton Keynes has to be paid for and does not have to pay for itself.

In other words, we have a very heavy additional burden in developing this huge new town, and this falls fair and square on the ratepayers of Buckinghamshire. The county rate is already 28.9p, which is the tenth highest in the country, and there is no doubt that Buckinghamshire could soar to the top of the league. A sudden increase on people who already consider themselves to be very highly rated would produce a very heavy burden indeed and would make it very difficult to develop the schools, the nursery schools and so on that we all hope to see growing up in the county.

I would say to my right hon. Friend, first, that there is a very strong case indeed for special consideration for the four counties I have mentioned which will lose because of reduced size. Secondly, I hope that my right hon. Friend will be able to reconsider the apparent reluctance to help the growing areas. I do not at all dispute the need to help the declining areas, but I hope that the growing areas can also be helped. Thirdly—this is perhaps the most important point—I hope that my right hon. Friend will agree that, so far as possible, the special positive discrimination programmes which I am sure are absolutely vital to help the really hard-hit areas should not come out of the normal rate support grant apparatus. I believe that the money must come out of central government funds.

Of course all rate support grant comes out of central Government funds and therefore, in a sense, it is a question of one or the other, but we need to set up a fuller system for defining priority areas and we have to allocate a separate amount of Exchequer funds to help them. That is of very great importance. If we believe that we can help the hard-hit urban areas by, as it were, soaking some of the other local authorities, we shall run into trouble, and I do not believe that being fair, or more than fair, to one group requires that we should be less than fair to another group.

Finally—I shall be grateful if my right hon. Friend can reply to this point tonight—I hope that it will be possible to debate in its draft form rather than in its final form the order which will arise under Clause 3. As we all know, when an order comes before this House it comes in a take-it-or-leave-it form. There is no possibility of going into detail about it. It may be held that I have been slightly out of order already by talking in detail about the contents of an order which is yet to come rather than about the Bill. I have done so because there is a risk that this is the only opportunity that I shall have to make these points. In the end we shall simply have an order and we shall have to take it or leave it. We shall take it, of course, and I fear that my constituents may be grievously harmed by our doing so.

I beg my right hon. and hon. Friends to realise that the problem facing our county is not just that of the normal squeals of people who do not like seeing their rates increased. It is of an altogether different order of magnitude, and I hope that we shall have an immediate and sympathetic response to it.

8.35 p.m.

Mr. Caerwyn E. Roderick (Brecon and Radnor)

I begin by quoting an extract from a speech of mine in the Welsh Grand Committee in July 1971 during a debate on the reform of local government in Wales. I said: I criticise the right hon. and learned Gentleman further for not awaiting publication of the Green Paper on the financing of local authorities. The Secretary of State said earlier that the proposals on functions and boundaries could be published separately. … What local authority can make proper recommendations until it has seen how the financial structure will work out?"—[OFFICIAL REPORT, Welsh Grand Committee, 13th July 1971; c. 58.] That was the start of the debate on local government. Now we come to the final stage where at last the money is to be discussed.

The Green Paper indicated several possibilities which could have produced income for local government. I have always believed that a system dependent entirely on the rating of property was an anachronism from the past. There is an element of ownership of property which indicates ability to pay, but that is not necessarily true. I have looked forward to seeing some form of local income tax. We have to keep an element of property rating for the sake of industry and perhaps to try to combat the empty property nonsense which is going on at present. On top of this we have the new rating valuation which has derated industry, thereby throwing a greater burden on domestic ratepayers, and the evidence shows that council houses and the smaller private houses have had proportionately high increases.

In the Opposition amendment the phrase appears which provides insufficient financial provision for local authorities … to meet the need for essential services". The Bill also provides insufficient information. Member after Member has asked for more detailed information about the figures. The Secretary of State talked about producing a White Paper later. Has not the right hon. and learned Gentleman realised that all this legislation is to be passed before next April and that the local authorities are to be fully operative and working on the figures by then? What hope have county treasurers?

We refer in the Opposition amendment to the increased costs of administration brought about by local government reorganisation. The cut in public expenditure means that local authorities cannot even get a Government loan to purchase premises in which to operate. The Government said "You will be reorganised, and now it is up to you to get yourselves set up financially." My local authorities have been refused aid to purchase an administrative centre. What hope have they of carrying on their work?

There is some merit in the amendment tabled by a number of Government backbenchers. Far more discussion is needed to switch a proportion from local to national funds where charges are clearly national. I understand that there is to be a switch of resources from rural areas to urban areas. The urban areas need more help, but surely that help should not come at the expense of the rural areas. It should be provided by more assistance from central Government funds. Additional money should be pumped into carrying out the urban aid programme. It cannot be done by a redistribution of existing funds.

My hon. Friend the Member for Erith and Crayford (Mr. Wellbeloved) spoke about the possibility of a tourist tax for London, and a Government supporter shouted that tourists spend money. We sometimes think that we keep Mid-Wales ticking over for the sake of the tourist. Men cannot live by tourism alone. We would need a tourist tax in Mid-Wales also.

Instead of getting extra funds, we shall suffer under the Bill. The county of Powys, part of which I represent, did not ask to be created. By far the larger proportion of the population objected to such a system of government. The three counties concerned objected strongly. The sprawling county of Powys, which is 100 miles long and has a population of 199,000, has suffered daylight robbery at the hands of the Government. It lost 16 per cent. of its property and 16 per cent. of its rateable value. Its richest part, an area of 2 per cent. of the whole, was hived off.

The hon. Member for Aylesbury (Mr. Raison) referred to some English counties which suffered a similar fate but he forgot to mention Powys. There was bitter opposition from people living in the areas which were removed from the county and in the areas remaining in the county, but all to no avail. The Welsh Office was determined to carry out the job.

Conciliatory noises were made about the financial plight of such a weak county. Ministers said the position would have to be considered and that safeguards would be produced. We now understand that, not content with forcing a structure on an unwilling population, the Department of the Environment proposes to lop off rate support to the extent that the ratepayers of the area will have to find 60 to 70 per cent. more through local rates. That seems to be a record figure in all the tables which have been published. No other county approaches it.

Our reason for believing that we shall suffer to such an extent is that in the resources element grant we find that sparcity weighting is missing. The grant was founded on a population per square mile basis. It ensured extra help for areas with large populations. I hope that the Minister will say where the compensatory help is to come from. To have maintained the present scheme would have been of minimal cost nationally. Locally the new scheme will prove disastrous. The main reason is the withdrawal of the sparcity element which I have mentioned. Transitional arrangements have been mentioned, but they will deal only partly with the problem and only in the short term.

Other counties are adversely affected by the proposals, but in no county are the proposals as relatively detrimental as in Powys. That is presumably because of the low population density in the county. There are already severe penalties imposed on those who live in the rural parts of Mid-Wales without adding to them. Such areas have been battling with the problem of depopulation. By having their burden increased they cannot hope to arrest the declining population. The position of officials and councillors in the area will be impossible. They are already in despair. There is already a loss of confidence and respect by Ministers and civil servants.

The Secretary of State for the Environment said that the statutory deductions in the gross value to arrive at a rateable value were to be increased. Are they to be increased proportionately? We have little information in the Bill about this. Are they to be increased more than in proportion to the increase in the gross values?

The right hon. and learned Gentleman mentioned transport. We would like to see more help for transport, but no assurance has been received. We shall want to look more closely at the level of expenditure which we can expect. I hope that we get more information in Committee.

My hon. Friend the Member for South Shields (Mr. Blenkinsop) dealt with national parks fairly fully. In Powys there is a fairly substantial national park. I reiterate one point which my hon. Friend made. It is all very well talking about funds, but what we are concerned with is how much. That is the important question. How much will there be to spend?

The Secretary of State said that he would extend the rate rebate scheme so that the domestic ratepayer who is in receipt of supplementary benefit will be included. But surely not all those in receipt of supplementary benefit will be covered. Their rates are not covered. How many of those on supplementary benefit will have their rates paid for them? We are told that 3 million domestic ratepayers will receive help in the form of rebates. With all this rebating and supplementing, it would surely have been simpler to have started with an income-related local tax.

I welcome the establishment of local government commissioners. The right hon. and learned Gentleman said that this structure would be paid for and run by local government. I hope that clearly-defined areas of operation will be laid down and that local government will be required to carry out its duties.

May I once again draw the attention of the Minister to Powys? Will he take another look at it? If he does not, we fear that we will face the danger of a breakdown in local government.

8.45 p.m.

Mr. Arthur Jones (Northants, South)

We have all been impressed by the figures that the hon. Member for Brecon and Radnor (Mr. Roderick) gave in quoting an increase in the rate demand of between 60 per cent. and 70 per cent. To some extent this reflects the feeling of uncertainty that I have about the proposals in the Bill and the effect they will have on local authorities. Most local authority treasurers are looking into the circumstances as they affect them, but they do not have the essential ingredient, namely the rate support grant regulation, which will set out the matter in positive terms. I share the hope of the hon. Gentleman that special arrangements will be made for someone who in this change is faced with the situation that the hon. Member outlined.

Mr. Roderick

I was quoting from figures published by the Department's Grants Working Group.

Mr. Jones

That adds more power to the hon. Member's argument. The debate has reflected the concern felt about local government finance generally and the uncertainties that are bound to be present for some weeks yet. It cannot be much longer before the Government come forward with their rate support grant proposals. I share the view of the hon. Member for South Shields (Mr. Blenkinsop) that the increasing amount of local government expenditure found by central Government does not have the effect of significantly decreasing the independence of local government.

If we look back over the past three years we see that during the current year the central Exchequer provided 60 per cent. of the total local government expenditure, in the previous year it was 58 per cent. and in 1971–72 it was 57.5 per cent. We shall inevitably see a rising proportion of local government expenditure met from central funds.

Mr. Ronald Brown (Shoreditch and Finsbury)

The hon. Member is quoting figures for the country as a whole. In London it is and has been only 40 per cent.

Mr. Jones

I am not dealing specifically with the London area. The hon. Member for Erith and Crayford (Mr. Wellbeloved) dealt most effectively with that earlier. I recognise that London does not have the additional difficult ingredient of reform, having been reformed some years ago.

I entirely support the extension of the rate rebate arrangements. I was interested to learn from the Secretary of State's speech that this will be enlarged from 800,000 ratepayers to a total of about 3 million. This demonstrates beyond question the whole basis of the present rating system. What we work from is the ability to pay, represented by ownership or occupation of property. When the bottom falls out of that argument it throws into question the whole basis of our present rating system. We have had great expectations, for good reasons, which have exceeded what has materialised.

The 1971 Green Paper, "The Future Shape of Local Government Finance" promised that … the right financial framework will be one in which central and local government can act as partners in promoting the welfare of the citizen, each exercising its proper reponsibilities with the minimum of overlap and potential conflict. Paragraph 4 of the consultation paper, issued in June, referred to the Government's proposals, which had the intention of achieving two principal objectives. Many of us hoped that the Government's policies would be based on that document, but unfortunately that has not proved to be the case in the provisions of the Bill. Paragraph 4 of the consultation paper said that the objectives were to share the cost of local services, fairly, both among individual local inhabitants having regard to their relative ability to pay and also between the general taxpayers and the local ratepayers. The second objective is to ensure, as far as possible, that decisions affecting local services will be taken locally. I appreciate that in the Bill the Government have made every endeavour to meet these objectives, but that cannot properly be done without the root-and-branch reform of local government finance. I recognise that the time is not opportune for such a reform; indeed, it is out of the question. Therefore, in my view the Government are doing what lies in their power to rectify the shortcomings of the present arrangements and provide for additional and special facilities where these are clearly necessary.

The services administered by local authorities are to a great extent determined by central Government. This is the difficulty from the point of view of local government. Reference has already been made to the tremendous demand for educational services, which takes up two-thirds of the average rate precept. Local authorities are caught between the millstones of increasing and widening demands both by the public and central Government for increasing services on the one hand and inadequacy of resources on the other. This is the burden of the the widespread complaints that one hears from members and officers in local government. The widely held view is that the financial arrangements of local government should have been looked at comprehensively. There is clearly no alternative but to leave the question for some years until the effects of reorganisation provide a clearer picture.

My right hon. Friend the Member for Wanstead and Woodford (Mr. Patrick Jenkin), the Chief Secretary to the Treasury, speaking at the last annual conference of the Association of Municipal Corporations was reported as saying, It may well be that, in a few years' time, when the recently enacted tax reforms have settled down, the then Government will find it possible to graft on to the national tax structure some new form of local taxation. The burden of many speeches today, from both sides of the House, has been that we shall need to look for a significant reform of the tax structure in national rather than local terms.

In the context of this delay and the unwillingness of the Department of the Environment and the Treasury to implement substantial reforms, we are inevitably faced with the propping-up arrangements contained in the Bill. Again, they do not provide any clear division of responsibility between central and local government.

The concern among professionals in the treasuries of local government is reflected in a statement by the Institute of Municipal Treasurers and Accountants, quoted in the August issue of Local Government Finance: … but to be faced with so many further imponderables almost makes a mockery of democratic local government and the so-called partnership between central and local government. That is a reflection of the dilemma facing many hon. Members who are concerned for the independence of local government and the widespread responsibilities of elected Members.

The terms of the Bill are a reflection of these circumstances, and one cannot be other than sympathetic for those who are faced with the problem of administering a cumbersome, outdated and essentially inequitable system. I feel sorry for those in local government and, though perhaps I ought not to say so, for the Secretary of State and Ministers who have not, I think, achieved the purposes that they and many of us hoped. I know that the timetable is difficult and tight, but it ought to have been possible to look at this subject in the early days of this Parliament. I agree with my hon. Friend the Member for Aylesbury (Mr. Raison) that we surely had all the facts, and it was only a question of political will and decision taking to enable the reform of local government finance to be introduced coincident with reform generally.

I welcome the extension of domestic relief. This will put the accent more properly where it should be, it having been lost over years past—namely, making the responsibility for payment rest more lightly on those with inadequate means. For this reason I should have supported some form of differential rating which would have placed the burden more clearly on industrial and commercial properties and removed it from the domestic sector. I think that the hon. Member for Birmingham, Small Heath (Mr. Denis Howell) holds that view. We are doing it the other way. We are derating the domestic element, and the inquiry into and assessment of means that that involves is unfortunate. I suggest that it would have been simpler and less of an imposition upon ratepayers to have had the other system of super-rating—I think that was the phrase used earlier—for other than residential hereditaments. But we must do the best we can with the tools that are to hand. In the circumstances, the Government have made the best use of the rating system that we have with the adjustments that are proposed in the Bill. For that reason, I welcome it.

It will be interesting to see what recommendations are forthcoming when we approach rate support grant considerations. Here again, I support my hon. Friend the Member for Aylesbury in making a plea for a chance to look at any such recommendations prior to them being presented in definitive terms to be dealt with on a "yea" or "nay" basis.

We shall clearly have to prop up the existing rating system for a number of years, and it will be increasingly difficult. We shall still have our debates on the rate support grant clouded by a whole series of imponderables. I well recall the hon. Member for Small Heath, in the Labour Government, trying to deal with it and confessing that it was a subject with which he found it difficult to cope. That is what everybody finds who has to contend with it. It is full of complications and, for those of us who see the end result, a tremendous amount of unpredictability. For this reason, I welcome the suggestion that we should have a chance to consider the matter this year. I hope that reasons will not be found to deny us that opportunity. I should think them inadequate in any event. I hope that that suggestion, which I warmly support, will be favourably received by my right hon. Friend.

This has been a difficult debate—a debate on rates invariably is difficult—and many of us who are seriously involved in the subject look forward to an interesting Committee stage.

9.0 p.m.

Mr. Michael Cocks (Bristol, South)

This wretched Bill confirms what we suspected when the Minister spoke on 20th March. It is "business as usual". It is simply a tarted-up version of the old system. In the three years that I have been a Member of this House, the most consistent complaint has been about the rating system. It is a nightmare for the elderly, the injustice of it is universally recognised, and yet nothing has been done about it.

The Secretary of State said that the new authorities would want to provide a high standard of service from the beginning. When the Minister opened some offices there, he described the new county of Avon, which has been created by the Government, as a bonny bouncing baby. The Minister departed and the Bristol ratepayers have been left holding the baby, because the county baby has continued to grow and create a new structure.

There are stories of substantial salary increases being paid to people for doing the same work, or at times less work. There is gross over-staffing. The chief officers seem to be settling down, but the rest of the staff are in a ferment and we are unable to get to grips with the situation because the Pay Board is out of our ken and we cannot question it through the normal channels of the House.

As the Government have created this new structure, I should like to know what extra grant they will make to Bristol to enable it to cope with this administrative burden. It is presenting a serious problem which will mean that the new county, which the Minister did so much to create, will be handicapped from the start. We are afraid that Bristol ratepayers will be held back while other areas to the north and south are brought forward.

I welcome the extension of the rebate scheme, but what will be done to make sure that there is complete take-up? Unfortunately it is often those who are least able to cope who do not know about a scheme.

I shall leave to the Committee stage other points that I wish to make. I welcome the setting up of the local government ombudsmen. I congratulate the Government in this case for not knocking Bristol but, instead, following its lead. The Bristol district council's Labour group adopted this as its policy before the election, and I am sure that the Minister would like to know that in this instance he is at one with the council. This is an important safeguard, but the Bill as a whole will be severely mauled in Committee because it is a poor thing after all these years of labour.

9.3 p.m.

Mr. Gordon Oakes (Widnes)

As the hon. Member for Northants, South (Mr. Arthur Jones) said, this has been an interesting and thoughtful debate. I think the hon. Gentleman will agree that the theme of the speeches from the Opposition benches and most of those from the Government benches, has been that local government is being starved of resources for its essential needs and that the Bill does hardly a thing to help relieve that serious situation. That is the theme of the reasoned amendment which my hon. Friends and I have put down, just as it is the theme of the reasoned amendment put down by hon. Gentlemen opposite.

The hon. Member for Ripon (Mr. Austick) said that much of the dissatisfaction with national government stems from a dissatisfaction with local government. I think that it is the other way round. Much of the dissatisfaction with local government is because the national Government, either by rates or by rate support, do not give sufficient money for local government needs. Consequently, the majority of complaints against local government arise because of lack of resources.

With the honourable exception of the hon. Member for Ripon, who has been present throughout the debate, I find it somewhat remarkable that the Liberal Party, which prides itself on community politics—on mending pavements, and so on—has not attended the debate in much more force, for the debate concerns the wherewithal for the resources of local government.

Mr. Austick

Does the hon. Gentleman agree that throughout the debate at least 10 per cent. of my party has been in the Chamber?

Mr. Oakes

A much greater percentage than 10 per cent. of the Liberal Party's discussion at elections is about local affairs. One would have thought that it would have been represented more forcibly in the House today.

The first major criticism of the Bill, as my hon. Friend the Member for Birmingham, Small Heath (Mr. Denis Howell) said, must be the timing. It is too late. The Bill ought to have been in existence, or there ought to have been full discussion of its terms, either before or when we discussed local government reorganisation two years ago. It is a nonsense to produce a Bill dealing with finance, the bedrock of local government, not at the time, not even one year later, but two years after local government reorganisation was discussed. Furthermore, the Bill has come at such a time that hon. Members on both sides of the House are at a disadvantage, in that if they want to discuss its provisions in detail they will be hindering local government, which they are trying to help, because they will be delaying the implementation of the Bill. It is not good enough that the Bill should have come so late.

The second major criticism, expressed most forcibly by my hon. Friend the Member for Small Heath and reinforced by the views of all the local government associations, is that the Bill does nothing to provide for alternative sources of local government finance. There may well be reasons for rejecting local income tax or local petrol tax, but they have not been adequately given. A Green Paper was produced and discussions were proposed. The local government authorities supplied answers and views, but very little has come from the Government, either in the House today or previously, to explain why they reject many of the alternative sources of income suggested by local government. Why, for example, is there nothing in the Bill about capital values, as distinct from the old, outdated, anachronistic rental values, which are the basis of rates? It was said in the Green Paper that this was a very fruitful and fertile avenue of discussion of a future system of rating.

It may be that at present the Secretary of State does not want to introduce new taxes, as he has said. We are in difficulties, because we are in phase 3, and the right hon. and learned Gentleman does not want to encourage inflationary expenditure. But in a long-term Bill that is no answer to the question why an enabling clause was not inserted so that in the future the question of capital values could be considered.

As my hon. Friend the Member for Small Heath has said, the Bill is not part of phase 3. It is a long-term Bill, dealing with local government finance, probably for decades to come—unless the Labour Party, as I hope it will, returns to power, sets up a Royal Commission and accepts its findings on a totally new basis of local government finance in the future.

Not only does the Bill not tackle major sources of finance; it does not even tackle the major inconsistencies in local government rating today. There has been discussion about the rerating of agricultural holdings. I echo what was said by my hon. Friend the Member for Small Heath. In a Bill of this nature there ought to be much more detailed examination of this question. There ought to be discussion, not necessarily about re-rating the lot, blanket fashion, or that at present the lot should be derated blanket fashion.

I understand the points made by my hon. Friend the Member for Cardigan (Mr. Elystan Morgan). No doubt he was thinking of some of the hill farms in Wales. But because a poor agricultural hereditament is derated, does it follow that a very rich agricultural heriditament should be equally derated? I think that it was the hon. Member or Devizes (Mr. Charles Morrison) who said that this was a question of adding to food costs. That was not the view of the Government when they produced the Green Paper a short time ago. The Green Paper on rating of agriculture, on page 28, at paragraph 2.79, begins by saying that the matter deserves consideration and that the Royal Commission on Local Government in England described derating of agriculture as an anomaly which should be removed. The Government then go on to say Certainly this is the one substantial class of property that is still exempt from rates. The exemption was originally granted when agriculture was a depressed industry, and circumstances now are very different. Arguments can be adduced both for and against derating. They go on, with nothing said about food prices, But, although there would be no technical problem in valuing agricultural land and buildings for rating, it would impose a substantial task of valuation on scarce professional staff—who could not cope simultaneously with the introduction of capital values for dwellings—and could probably not be completed before the 1980s. That is why, the Government concluded, they could not deal with agriculture. They did not have the professional staff to deal with that and capital values. But in the Bill the Government are dealing neither with the derating of agriculture nor capital values. The argument about professional staff shortages therefore goes by the board. But because of the poverty of many rural areas this matter should be looked at. The system of blanket derating is of little help to the farming community. It does a great disservice to rural areas and a general disservice to local government generally. In the rural areas it takes up the resources grant and it diminishes the amount of grant available nationally for other authorities. This matter should be looked at, particularly in the light of the Government's views in the Green Paper.

Similarly, why does the Bill do nothing to alter the archaic way in which we extract much-needed revenue from Crown properties? Local authorities have no rights of appeal against the diktat of the Treasury. The Treasury decides what contribution a certain Crown property hereditament shall make, and a local authority has to abide by that diktat. This is the sort of Bill in which we should be considering the rating of hereditaments that belong to the Crown.

Perhaps I may introduce a personal note here, because a number of parishes in my constituency are particularly affected by National Coal Board and Post Office property, and so on. Under the present system, although the rural district and the future district may benefit from a contribution, the parish council benefits little or not at all. Other parishes containing ordinary industrial hereditaments—one in my constituency contains the Halewood Ford Works—benefit considerably on a rateable value basis. This, too, should be considered at parish level in the Bill.

A great deal of interest is being revived in parish councils. They were one form of local authority in the Local Government Act which were expanded rather than contracted. Again, why is there nothing in the Bill to increase the penalty on empty properties, providing for them not only to be rated but to be super-rated? There is a great need in housing, and certainly in some office development, for local authorities to penalise landlords who deliberately keep their properties empty. There must be some flexibility. I know that there are difficulties. Sometimes the property is empty, and because it is empty it is almost impossible to trace the owner.

I agree with the selectivity that the Government have provided in this Clause. I do not agree with the level of the amount, because the Harry Hyamses of this world who are still making an enormous capital increase, day by day and week by week, will not be deterred by rates alone. By super-rates they might be deterred, and at least the community would be getting some of the benefit from the empty property, which at the moment is going purely into the pockets of speculators.

The hon. Member for Northants, South mentioned the super-rating of industry. As we are shortly to have the Environmental Protection Bill, to which I look forward—as I know the hon. Gentleman does—I had hoped to see more positive provisions in this Bill, for example for the super-rating of pollution-producing industries—a pollution premium, for example, which would provide not only extra resources for the local authority, which so often must clean up the mess, but a strong incentive to industry itself to tackle the job of eradicating the pollution. Making the polluter pay is a fruitful and fertile idea, which could have been dealt with, but not a word of such a novel idea finds its way between the covers of this pedestrian Bill.

Although I welcome the specific grant of 90 per cent. towards student grants—in view of the desperate plight of many young students today, the key question, as I am sure my hon. Friends at least will agree, is: 90 per cent. of what?—nevertheless, there is considerable force in the argument that this should be a 100 per cent. grant to local authorities, because the recipient of the degree or of the other award at higher education level rarely, if ever, returns to the local authority concerned. This is a national question. Let us have equal grants throughout the country and decent grants for our students provided 100 per cent. by the Government.

That leads to the much bigger argument that hon. Members on the Government benches have advanced—the question of teachers' salaries, which are laid down nationally in any case but are a very considerable burden on the rates, and which could be considered as a transfer from local government finance to national Government finance without any loss of individual discretion and determination by local authorities. They could not lose their individual determination, because teachers' salaries are laid down nationally. It is a great pity that when the Government were considering the question of student grants they did not consider at the same time putting on to a national basis the funding of teachers' salaries.

I want to look briefly at some of the other faults in the Bill, which I hope we shall be able to rectify in Committee. As hon. Members have said, the Bill does little or nothing for the large cities and conurbations. The formula is likely to be the mixture as before. That mixture as before is leading to the bleeding to death of many of the large conurbations. Indeed, Clause 2(4) denies to metropolitan districts a needs grant if the metropolitan county as a whole is above the national average. This will surely lead to monstrous inequalities. It will lead to inequalities in London, for a start.

I refer the Minister for Local Government and Development to our own area. It is a classic example. Merseyside metropolitan county consists of such widely disparate districts as Southport, which is well-heeled, parts of his own authority, which is well-heeled, the Wirral, and Bebington. It also contains the city of Liverpool, which is in a desperate plight, and St. Helens, which has old and derelict property. It also contains Knowsley—a brand-new authority, vibrant with people entering it.

Are we to say that, if the national average is exceeded by Merseyside county as a whole, St. Helens and Knowsley will be deprived of the needs grant because they happen to be within that metropolitan county, despite their needs? That is precisely what Clause 2(4) states. In Committee we shall seek to remove that provision from the Bill.

Allied to that is what was said by two Conservative Members, the hon. Member for Essex, South-East (Sir Bernard Braine) and the hon. Member for Aylesbury (Mr. Raison), in two interesting speeches supporting a point put forcibly to me by my hon. Friend the Member for Hitchin (Mrs. Shirley Williams), who has also had correspondence addressed to her from the area in question. The Bill appears to take away from the outer metropolitan areas the outer metropolitan rate benefit they now receive. There is considerable population change in their areas, with young people coming in and new towns being created. As well as population, child population and so on, the formula should include an element for change by an authority either losing or rapidly gaining population.

The factor of time is not considered in the equation and yet it is vital in regard to the resources of a metropolitan district or non-metropolitan district, as I know very well from the situation in Knowsley, where there is an explosively expanding population with people coming in. Consequently the change creates a tremendous financial burden on the local authority, and it should be considered in the formula.

Clause 16 refers to the order that the Secretary of State must lay within the next six weeks if he is to lay it, which can put right the anomaly of gross and net rateable values created at the last revaluation. I asked the right hon. and learned Gentleman why the order had not already been made and he gave an explanation, though it was not adequate.

The Government mismanaged the situation when revaluation took place. There is a narrowing between the net and gross rateable value the higher the gross rateable value goes—reasonably so, because the difference between net and gross is based on the repairs allowance and so on for the owner, which would naturally narrow according to the rateable value of the property. What the Government forgot when they revalued all properties, multiplying the value two and a half, was that they were narrowing by that much the gap between net and gross rateable value. That matter should have been put right at the time, but it has still not been corrected.

It looks as though the Government now intend to do something about the matter. It was not on for the Prime Minister to tell local authorities at the time that their rates should go up by a precise multiple of two and a half when there had been that omission in the formula of the difference between the net and gross rateable values.

I regret that there is nothing in the Bill to deal with the valuation of council houses. Their rates were raised considerably in proportion to those of other properties at the time of revaluation. I do not charge the Government with responsibility for that. Even if they had done it, at least it would have been a democratic decision. What I regret is that it was done at the whim of the Inland Revenue, of the valuation officers who decided to increase the rates of council property.

In a Bill of this nature there should be some democratic control, either at local level or at Government level, of major policy decisions. Council house tenants throughout the country are feeling the effects of a decision made not in the House or even by a Minister or by local government, but by civil servants, namely the Inland Revenue.

The water charge is a new creature. I heard of it only last week. Two points arise from it. First, why does not the water charge, or sewerage charge, which must be put separately on the face of the rate—and it will be quite a burden on local authorities to make out a separate rate for the water charge, which is quite unnecessary, but which stems from the hiving-off of water and sewerage matters from local authority control—qualify for rebate in the same way that rates qualify for rebate?

The second point relates to the question of enforcement. Under the Water Act local authorities will have great difficulties. They will have to take any defaulters to the magistrates' courts in respect of the rates and, I understand, to the county courts in respect of the water or sewerage charge. I should have expected the Government to ease the burdens on local authority treasurers by putting in the Bill a provision amending the 1967 Act so that the whole matter could be dealt with in the magistrates' courts rather than that treasurers, who are busy people, should have to chase defaulters from one court to another.

Part III of the Bill relates to the setting up of the local commissioners. It has nothing to do with the rest of the Bill; it is quite extraneous. It has nothing to do with finance. It has been grafted on to this weak, miserable little Bill presumably to make it more popular. We welcome any provision which gives the ordinary citizen redress against maladministration, but is this the right Bill in which to do it or should it be done in a separate Bill? Also, is this the right time to introduce it?

Local authorities are in the turbulence of reorganisation as to their boundaries, as to water and health, responsibility for which has been taken from them, as to staffing and now, under the Bill, as to finance. The magic date of 1st April 1974 is not the right time to create the local commissioners. I do not think the public would disagree with that, and I am sure that local authorities would welcome some delay, even by 12 months, to allow them to settle in their new structure before the implementation of this new and completely novel local commissioners idea.

As my hon. Friend the Member for Manchester, Gorton (Mr. Marks) said, the public should have the statutory right to go direct to the commissioners rather than through councillors. I know of the provision for checks and balances in Clause 25. Incidentally, despite the Minister's intervention, I cannot see in Clause 25 provision whereby a Member of Parliament can go to the local commissioner. I realise that, if one member of an authority will not go to him, another member can do so, but I cannot see anything in the clause which gives Members of Parliament the right to go to the local commissioners in the way that they can go to the Parliamentary Commissioner. As my hon. Friend the Member for Gorton rightly said, we are regarded locally as the ombudsmen and we must have direct access to the commissioners. However, I should prefer members of the public to be able to go to them in their own right if they so wished.

Although local government has to pay for the administrative structure of the commissioners, it is the Secretary of State who will do all the appointing. Local authorities certainly have a grievance here. Either they should have much more say in the appointing of the commissioners or the Government themselves should pay for the servicing of this arrangement. The Government should not charge local authorities with the cost of running this service and reserve to the Minister the right to make appointments. Therefore, even though we welcome this part of the Bill, it is a qualified welcome. It is inept as to time and as to the clumsy provisions by which a member of the public has access to a commissioner. But, most important of all, the Bill fails dismally to specifiy the rate and the grant. The Government have singularly failed to tackle the root problem of inadequate resources for local government or to tackle with any heart the regressive nature of the rating system.

While it is unlikely that we shall vote against the Second Reading of this puny, tiny little Bill, I ask hon. Members on all sides of the House to consider all the speeches that have been made—there have been many very good speeches by Conservative Members—and to go into the Lobby in support of the reasoned amendment to record what can only be described as the contempt of this House, the contempt of local government and the contempt of millions of ratepayers at the dismal failure of the Government to deal with a major problem and to deal with it at the right time.

9.32 p.m.

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

I start in perfect harmony with the hon. Member for Birmingham, Small Heath (Mr. Denis Howell) by stressing the importance of local government to every citizen of the land, and therefore the importance of the Bill, and by denying that it is a puny little Bill, as the hon. Member for Widnes (Mr. Oakes) called it. It is, in fact, three or four Bilis rolled into one. As the hon. Member for Widnes rightly said, the ombudsman has little to do with the financial side, but we have taken the opportunity of providing by statute for something for which I thought both sides of the House have wanted to provide for some time past.

These two or three Bills rolled into one deal with block grants, general grants, specific grants, individual rate relief, the ombudsman and the removal of a number of controls over local authorities. Yet this Bill does not deal with that with which hon. Members are most concerned—the question of how much, as the hon. Member for Small Heath put it. Not only does it not deal with how much; it does not deal with how much there will be in grants and, therefore, how much will have to be raised in rates. It is an enabling Bill and therefore, until the negotiations with local authority associations are complete, I cannot put a figure to the exercise of the powers which the Bill gives to the Secretary of State. Nevertheless, I shall try to answer as many of the questions which have been raised as I possibly can.

Many hon. Members have indicated that we cannot leave the rating system where it is, and it has been suggested, particularly from the Opposition Front Bench, that we should have a Royal Commission. I do not think we should get any further by means of a Royal Commission than we did by means of the Green Paper of two years ago. We should only have discussion before the Royal Commission, repeating the discussion on local government finance, which the Government stimulated by issuing that Green Paper; it would be both disastrous and defeatist to put the whole matter back into the melting pot. I say that against the background of the statement made by my right hon. and learned Friend the Secretary of State that this is not the end of the road, and it is not the final statement on local government finance. We believe that it is the right statement for the present moment when local government is under the stress of reorganisation, but that does not mean that we have decided for ever the structure of local government finance. I thought that my hon. Friend the Member for Scarborough and Whitby (Mr. Michael Shaw) put this very well when he said, in effect, that as we are undertaking a massive reorganisation it is surely wise to let the effects settle before we give further work to the local councillors who are subject to that reorganisation.

I was asked whether we should have brought the Bill before the House earlier; should we have started to reorganise the finance of local government before we reorganised its structure? There would have been advantages in carrying out all these operations together; right hon. and hon. Gentlemen opposite know that that has been my personal view. However, it would have been rather an indigestible piece of legislation for the House to stomach. There were considerable difficulties in reorganising the structure of local government, apart from the problems involved in dealing with the financial side.

It would have been very difficult to decide the right structure for the finance of local government before we decided what the functions were and saw how those functions worked out. We have left it a great deal to the local authorities to decide between themselves what functions shall be carried out by one or the other. We ought to see how that works out in practice. It would have been difficult to bring forward a Bill at an earlier stage.

The other half of the complaint about the late date of the Bill is that it has not given local authorities enough time to budget for next year's expenses and their revenues. But this happens every year. The local government budget has been in November ever since we had the rate support grant. Local authorities are used to negotiating with Government Departments over the period from July to November. On this occasion, the statutory meeting at which the final figure of relevant expenditure and the amount that the central Government will contribute to that relevant expenditure is agreed will be held on 27th November.

We had a contrary argument from my hon. Friend the Member for Essex, South-East (Sir Bernard Braine). I am sorry to couple my hon. Friend for a moment with the hon. Member for Ripon (Mr. Austick) who both said that we should have delayed the Bill for a year or two. If I may, I shall return to that argument in some detail. It would have been quite impossible for local government to continue to function on the formulae of the rate support grant and other grants that apply to the present structure of local government for these could not have applied to the new structure on 1st April.

I want to deal with the relief of local authority expenditure before dealing with the rate support grant. The expenditure has been relieved of the local health services, to the value of about £170 million, of the school health service, about £35 million, of 90 per cent. of teacher training and student awards—that, in answer to my hon. Friend the Member for Harwich (Mr. Ridsdale), is worth £126 million—of 90 per cent. of rate rebates which we expect will amount to about £95 million—so that the relief to local authorities in that connection will be between £85 million and £90 million—and of sewerage and water which eventually will be taken off the local authority bill to the extent of between £213 million and £214 million. There will also be the separate national parks grant. I shall return to that later.

I was asked why we had decided upon a 90 per cent. and not 100 per cent. subsidy for rate rebates and for teacher training and student awards. I suppose that I should be used by now to the Oliver Twist attitude. If we give more, we are asked for yet more. The teacher training and student awards which have been included previously in the relevant expenditure, ranking for rate support grant at 60 per cent., will now rank for an increase to 90 per cent. Rate rebates at 75 per cent. will be increased to 90 per cent. While local authorities retain administrative and discretionary powers in certain matters, they should not merely be post offices.

My hon. Friend the Member for Harwich pressed hard the case which he has put so frequently and eloquently before the House—namely, to transfer all the costs of education to the Exchequer. Local authorities still retain considerable discretion in the administration of education. It is easy to say that teachers' salaries should be transferred to the Exchequer, but the local authorities would still have a wide discretion as to the number of teachers whom they employ.

We should hesitate before removing such functions from local government or removing the expense of those functions and, therefore, the discretion operated by local government in the expenditure of money. There may be certain items in respect of which we could go further than we have on this occasion. For example, further education expenses are pooled and local authorities have little discretion in these. These are the sort of things which we can consider. As my right hon. and learned Friend said, this is at least a start in the transfer to the Exchequer of some items in which local authorities have practically no discretion.

In answer to my hon. Friend the Member for Harwich, the rate support grant is not a Chinese puzzle. Perhaps I can describe the rate support grant and the distribution of it to show where the Bill improves the system. The process of deciding and distributing the taxpayers' contribution to local government revenue—that is, the rate support grant—is first to estimate the total public expenditure of all local authorities for the coming year. That is done at the coming year's prices, which in this case would be 1974 prices.

From the estimate of total expenditure—as an example I take a round figure of £5,500 million—we deduct certain items to reach what is called the relevant expenditure. To take another round figure, that might be £5,000 million. If we were to apply this year's percentage—60 per cent.—the taxpayer would be contributing £3,000 million. The rest would have to be raised by rates, half from domestic ratepayers and half from industrial, commercial and other properties.

Next, we come to the distribution of the £3,000 million. That is where the Bill has an important effect. First, the Exchequer pays the domestic element. That is now 6p off the rate poundage. The Exchequer comes in as a ratepayer for that amount on every householder's rate bill. As my right hon. and learned Friend has said, we propose to put up that figure to 10p at least. If any householder in any area suffers from some unexpected twist in the needs or resources element formula, not only will the 10p be paid by the Exchequer but the Bill makes it possible to use that factor geographically. This device is now in the Bill, and that gives much greater flexibility to meet the losses in those areas through another formula to which I shall come.

For example, one area may lose a resources grant which it was receiving in the previous year, or have to pay more for water and sewerage. We shall use the domestic element to correct this even by giving more than 10p, as I have explained. Next, we calculate the resources element, having deducted the domestic element. Up to now we have taken an average 1p rate over the whole country. Following discussions with local authorities we are intending to base this on rateable value in future, so as to give greater certainty to local authorities. We have previously fixed this at an average over the whole country.

Under the formula now proposed we shall place that line a little higher, so that a greater part of the remainder of the £3,000 million will count as resources element. Up to this point I have been talking about figures out of the £3,000 million, totalling only about £1,000 million, leaving £2,000 million for the needs element. We are providing a new needs element which will make better provision for the conurbations, to which the hon. Member for Widnes referred as well as for the cities. We gave an undertaking some time ago that we proposed to amend the needs formula to this extent.

Because a greater part of the rate support grant will go to assisting the cities which have met with great difficulties it means that there will not be so much grant for the well-to-do areas. To balance that out and to prevent the impact on the individual ratepayers in those areas from being too harsh we propose to apply a formula both through the domestic element and by a weighting. We have always provided a London weighting which applied to London, Hertfordshire, Essex and Surrey. There is no intention of discontinuing that. I say that in answer to my hon. Friend the Member for Essex, South-East, who specifically asked me that question. We have to consider a further area of London weighting.

Mr. Oakes

I do not know whether the Minister is coming to this point, but will he deal with the issue of Clause 2(4) and with what I consider to be an injustice in the metropolitan counties, whereby if the country as a whole is over the national average, each individual metropolitan district is denied its resources element'?

Mr. Page

I was coming to that. I realise that some anxiety has been voiced over the provisions of that clause. I take it that the objection is to the Secretary of State's power to make regulations under which a metropolitan district could qualify for a resources element only if the rateable resources of the county as a whole were below the national standard. We do not propose to use this power certainly in the grant settlement for 1974–75.

Under Clause 10 my right hon. and learned Friend must consult local authority associations before making use of the regulation-making powers relating to Part I. There would be every opportunity for the associations to make their views known before the power given in Clause 2(4) was used. It is reasonable to preserve a balance. The metropolitan counties and the Greater London Council have power to operate rate equalisation schemes. It is a reasonable counterpart to this that the Secretary of State should have power to treat such a metropolitan area as a whole.

Mr. Denis Howell

About 10 minutes ago the Minister said, in answer to a question about timing and lack of opportunity for treasurers to consider the rate support grant, that this was a normal procedure which was followed every year. I am sure the House is grateful for the extraordinary explanation of the complicated formula that the Government are to propose. It is clear that this will happen every year. This year is a special year, and it will take weeks for treasurers to understand and assess the difficult formula which the Minister has outlined. Will he look at the timetable that is available to the House and local authorities for consideration of the rate support grant?

Mr. Page

I thought I had made the matter very elementary—indeed, I was afraid that I was making it too elementary for the hon. Gentleman. I thought he knew all about it. Local authority treasurers have been discussing the matter for a considerable time as part of normal negotiations. We could not have postponed the introduction of a new grant, because we had undertaken to help the cities.

My hon. Friend the Member for Essex, South-East suggested that we should have postponed this matter for a year. However, to apply the old 1966 Act formula again in 1974–75 would, because of reorganisation, bring about a totally random distribution of grant. Thus, in comparison with what happened before reorganisation, some of the metropolitan areas and some of the Home Counties round London would lose and some would gain quite indiscriminately. Because of the existence of the new authorities, a reform of the grant was needed.

Sir Bernard Braine

My right hon. Friend will realise that that suggestion was made because the House is not in a position to evaluate the effect of the proposals on the level of rates next year. Certain concessions have been made and it may be that they will alter the picture. But my right hon. Friend should not make too heavy weather of this. Before it gives its blessing to any measure that flows from the Bill, the House is entitled to have information. It has not yet got it.

Mr. Page

Before the House decides on the actual figures, the regulations for the grant will come before the House and we shall then be able to provide figures. I am in exactly the same difficulty over figures as is my hon. Friend the Member for Essex, South-East. This is a debate on a Bill which seeks to give power—and a flexible power—to the Secretary of State to try to meet exactly the sort of points which my hon. Friend has put before the House today. His speech was cogent and forceful—all the more cogent because of the moderate tones in which he expressed himself. I thank him for the way he put his points. We are aiming at exactly the same result.

Mr. Elysian Morgan

It is not a question of the figures. It is a question of the main criteria, namely the headings of the formula which will be the basis of calculations. I accept that the figures cannot be given at this stage but surely the main formula can be disclosed to the House.

My. Page

But I have given the main formula. I have said that, so far as the domestic element is concerned, it will be 10p and will be geographically varied above 10p. As for the resources grant, I cannot give the percentage. But I have indicated that by raising the figure it will be a greater amount of the rate support grant than before. As for the needs element, the hon. Member will find this set out in the consultative paper. There are in fact six matters there set out. The main one is a new social services unit which will take into account the expenditure which many districts find not taken into account in the present formula.

As the hon. Member for Cardigan (Mr. Elystan Morgan) has intervened, perhaps I may answer his points, because he made a powerful speech in defence of Wales. The average domestic rate payment in 1973–74 in Wales is £50, which compares with £66 for England. Therefore, rate burdens in Wales are much lower than in England. In Cardigan the average domestic rate payment in 1973–74 is £29, so the hon. Gentleman's constituents have not suffered too badly. He can go back and assure them of that.

The hon. Member for Small Heath mentioned other forms of tax which we should allow local authorities to raise. Of course, he put forward no alternative to the rating system other than a Royal Commission. This is not what one expects from the Opposition when they are attacking a Bill which, according to the reasoned amendment, makes no provision for additional sources of local finance other than the rating system. The hon. Gentleman put forward about half a dozen sources of revenue. He said that we should launch out in some fine boats on a new sea. The fine boats he defined as fuel tax, income tax, and all the others, and from every one of these he himself pulled the bung so that they sank. He explained why we should not employ any of those, except lotteries. My right hon. and learned Friend said that we are considering lotteries as a possibility for local government finance. The hon. Gentleman sabotaged all the suggestions that he himself put forward. I do not know whether he wants to proceed with local income tax, which could be given just as easily with an increase in the rate support grant.

The reasoned amendment, which I shall ask the House to reject, is based on the statement that the Bill provides insufficient financial provision for local authorities to enable them to meet the need for essential services and the increased costs of administration".

The Bill does not deal with this matter in specific figures. It empowers the Secretary of State to apply a procedure and formula that will make sufficient financial provision for local authorities to carry on local government services from the rates they raise.

The next item in the amendment, which relates to local government reorganisation, suggests that it will inevitably increase the inequitable burden on the domestic ratepayer". I have already made clear how we are preventing the burden from falling on the domestic ratepayer by increasing the domestic element.

The amendment then states that the Bill makes no provision for additional sources of local finance other than the rating system.

The hon. Member or Small Heath, having put forward a list of possible alternatives, destroyed them all and suggested that we go back to a Royal Commission. That is a defeatist attitude. I ask the House to reject the amendment and to give a Second Reading to the Bill.

Question put, That the Amendment be made:—

The House divided: Ayes 178, Noes 190.

Division No. 6]	AYES	[10.0 p.m.
Allaun, Frank (Salford, E.)	Dempsey, James	Hattersley, Roy
Archer, Peter (Rowley Regis)	Doig, Peter	Hatton, F.
Armstrong, Ernest	Dormand, J. D.	Houghton, Rt. Hn. Douglas
Ashton, Joe	Douglas-Mann, Bruce	Howell, Denis (small Heath)
Austick, David	Duffy, A. E. P.	Hughes, Mark (Durham)
Barnett, Guy (Greenwich)	Dunnett, Jack	Hughes, Robert (Aberdeen, N.)
Barnett, Joel (Heywood and Royton)	Eadie, Alex	Hughes, Roy (Newport)
Bidwell, Sydney	Edelman, Maurice	Hunter, Adam
Bishop, E. S.	Edwards, Robert (Bilston)	Janner, Greville
Blenkinsop, Arthur	Edwards, William (Merioneth)	Jager, Mrs. Lena
Booth, Albert	Evans, Fred	Jenkins, Hugh (Putney)
Boothroyd, Miss Betty	Ewing, Harry	John, Brynmor
Bradley, Tom	Fisher, Mrs. Doris (B'ham, Ladywood)	Johnson, Carol (Lewisham, S.)
Brow, Robert C. (N'c'tle-u-Tyne, W.)	Fitch, Alan (Wigan)	Johnson, James (K'ston-on-Hull, W.)
Brow, Hugh D. (G'gow, Provan)	Fletcher, Ted (Darlington)	Johnson, Walter (Derby, S.)
Brow, Ronald (Shoreditch & F'bury)	Ford, Ben	Jones, Barry (Flint, E.)
Campbell, I. (Dunbartonshire, W.)	Fraser, John (Norwood)	Jones, Dan (Burnley)
Carmichael, Neil	Freeson, Reginald	Jones, Gwynoro (Carmarthen)
Carter-Jones, Lewis (Eccles)	Galpern, Sir Myer	Jones, T. Alec (Rhondda, W.)
Castle, Rt. Hn. Barbara	Garrett, W. E.	Kaufman, Gerald
Clark, David (Colne Valley)	Gilbert, Dr. John	Kelley, Richard
Coleman, Donald	Ginsburg, David (Dewsbury)	Kerr, Russell
Concannon, J. D.	Golding, John	Kinnock, Neil
Crawshaw, Richard	Grant, George (Morpeth)	Lambie, David
Crossman, Rt. Hn. Richard	Grant, John D. (Islington, E.)	Lamborn, Harry
Cunningham, Dr. J. A. (Whitehaven)	Griffiths, Eddie (Brightside)	Lamond, James
Davidson, Arthur	Hamilton, James (Bothwell)	Latham, Arthur
Davies, G. Elfed (Rhondda, E.)	Hamilton, William (Fife, W.)	Lawson, George
Davies, Ifor (Gower)	Hamling, William	Leadbitter, Ted
Davis, Clinton (Hackney, C.)	Hannan, William (G'gow, Maryhill)	Leonard, Dick
Davis, Terry (Bromsgrove)	Hardy, Peter	Lomas, Kenneth
Deakins, Eric	Harper, Joseph	McBride, Neil
Doll, Rt. Hn. Edmund	Harrison, Walter (Wakefield)	McCartney, Hugh
McElhone, Frank	Oswald, Thomas	Stallard, A. W.
Machin, George	Padley, Walter	Stoddart, David (Swindon)
Maclennan, Robert	Palmer, Arthur	Stonehouse, Rt. Hn. John
McMillan, Tom (Glasgow, C.)	Pannell, Rt. Hn. Charles	Stott, Roger
McNamara, J. Kevin	Parker, John (Dagenham)	Strang, Gavin
Mallalieu, J. P. W. (Huddersfield, E.)	Pavitt, Laurie	Summerskill, Hn. Dr. Shirley
Marks, Kenneth	Peart, Rt. Hn. Fred	Thomas, Rt. Hn. George (Cardiff, W.)
Marquand, David	Pendry, Tom	Thomas, Jeffrey (Abertillery)
Marsden, F.	Perry, Ernest G.	Tope, Graham
Marshall, Dr. Edmund	Prentice, Rt. Hn. Reg.	Torney, Tom
Mayhew, Christopher	Probert, Arthur	Tuck, Raphael
Meacher, Michael	Radice, Giles	Varley, Eric G.
Mellish, Rt. Hn. Robert	Reed, D. (Sedgefield)	Wainwright, Edwin
Millan, Bruce	Ridsdale, Julian	Walker, Harold (Doncaster)
Miller, Dr. M. S.	Roberts, Albert (Normanton)	Wallace, George
Milne, Edward	Roberts, Rt. Hn. Goronwy (Caernarvon)	Watkins, David
Mitchell, R. C. (S'hampton, Itchen)	Robertson, John (Paisley)	Weitzman, David
Morgan, Elystan (Cardiganshire)	Roderick, Caerwyn E. (Brc'n & R'dnor)	Wellbeloved, James
Morris, Alfred (Wythenshawe)	Ross, Rt. Hn. William (Kilmarnock)	Whitlock, William
Morris, Charles R. (Openshaw)	Sandelson, Neville	Williams, W. T. (Warrington)
Morris, Rt. Hn. John (Aberavon)	Sheldon, Robert (Ashton-under-Lyne)	Wilson, Alexander (Hamilton)
Mulley, Rt. Hn. Frederick	Short, Rt. Hn. Edward (N'c'tle-u-Tyne)	Wilson, William (Coventry, S.)
Oakes, Gordon	Silkin, Hn. S. C. (Dulwich)	Woof, Robert
Ogden, Eric	Silverman, Julius
O'Halloran, Michael	Skinner, Dennis	TELLERS FOR THE AYES:
O'Malley, Brian	Small, William	Mr. Michael Cocks and
Oram, Bert	Smith, John (Lanarkshire, N.)	Mr. James A. Dunn.
Orbach, Maurice	Spriggs, Leslie
NOES
Allason, James (Hemel Hempstead)	Gardner, Edward	Macmillan, Rt. Hn. Maurice (Farnham)
Amery, Rt. Hn. Julian	Gibson-Watt, David	McNair-Wilson, Michael
Archer, Jeffrey (Louth)	Gilmour, Ian (Norfolk, C.)	McNair-Wilson, Patrick (New Forest)
Astor, John	Gower, Raymond	Marten, Neil
Atkins, Humphrey	Grant, Anthony (Harrow, C.)	Mather, Carol
Baker, Kenneth (St. Marylebone)	Green, Alan	Mawby, Ray
Baker, W. H. K. (Banff)	Griffiths, Eldon (Bury St. Edmunds)	Maxwell-Hyslop, R. J.
Balniel, Rt. Hn. Lord	Grylls, Michael	Meyer, Sir Anthony
Bell, Ronald	Gummer, J. Selwyn	Mills, Peter (Torrington)
Benyon, W.	Gurden, Harold	Miscampbell, Norman
Biffen, John	Hall, Miss Joan (Keighley)	Mitchell, Lt.-Col. C. (Aberdeenshire, W.)
Biggs-Davison, John	Hall, Sir John (Wycombe)	Mitchell, David (Basingstoke)
Boardman, Tom (Leicester, S. W.)	Hall-Davis, A. G. F.	Moate, Roger
Boscawen, Hn. Robert	Hamilton, Michael (Salisbury)	Money, Ernie
Bossom, Sir Clive	Hannam, John (Exeter)	Monks, Mrs. Connie
Bowden, Andrew	Harrison, Brian (Maldon)	Monro, Hector
Braine, Sir Bernard	Harrison, Col. Sir Harwood (Eye)	Montgomery, Fergus
Bray, Ronald	Haselhurst, Alan	More, Jasper
Brewis, John	Hastings, Stephen	Morgan, Geraint (Denbigh)
Brinton, Sir Tatton	Hayhoe, Barney	Morgan-Giles, Rear-Adm.
Brocklebank-Flowler, Christopher	Hicks, Robert	Morrison, Charles
Brown, Sir Edward (Bath)	Hiley, Joseph	Mudd, David
Butler, Adam (Bosworth)	Holland, Philip	Neave, Airey
Carlisle, Mark	Holt, Miss Mary	Nott, John
Chapman, Sydney	Hordern, Peter	Onslow, Cranley
Clark, William (Surrey, E.)	Hornby, Richard	Owen, Idris (Stockport, N.)
Clarke, Kenneth (Rushcliffe)	Hornsby-Smith, Rt. Hn. Dame Patricia	Page, Rt. Hn. Graham (Crosby)
Clegg, Walter	Howell, Ralph (Norfolk, N.)	Page, John (Harrow, W.)
Cockeram, Eric	Hutchison, Michael Clark	Parkinson, Cecil
Cooke, Robert	Iremonger, T. L.	Percival, Ian
Coombs, Derek	James, David	Peyton, Rt. Hn. John
Cooper, A. E.	Jennings, J. C. (Burton)	Pink, R. Bonner
Cormack, Patrick	Jessel, Toby	Powell, Rt. Hn. J. Enoch
Costain, A. P.	Jones, Arthur (Northants, S.)	Price, David (Eastleigh)
Crouch, David	Jopling, Michael	Prior, Rt. Hn. J. M. L.
Davies, Rt. Hn. John (Knutsford)	Kaberry, Sir Donald	Proudfoot, Wilfred
d'Avigdor-Goldsmid, Maj.-Gen. Jack	Kellett-Bowman, Mrs. Elaine	Pym, Rt. Hn. Francis
Dean, Paul	Kimball, Marcus	Raison, Timothy
Deedes, Rt. Hn. W. F.	King, Evelyn (Dorset, S.)	Ramsden, Rt. Hn. James
du Cann, Rt. Hn. Edward	Kinsey, J. R.	Redmond, Robert
Edwards, Nicholas (Pembroke)	Kitson, Timothy	Reed, Laurance (Bolton. E.)
Elliot, Capt. Walter (Carshalton)	Knight, Mrs. Jill	Rees-Davies, W. R.
Elliott, R. W. (N'c'tle-upon-Tyne, N.)	Knox, David	Rippon, Rt. Hn. Geoffrey
Eyre, Reginald	Lamont, Norman	Roberts, Wyn (Conway)
Fenner, Mrs. Peggy	Lane, David	Rossi, Hugh (Hornsey)
Fidler, Michael	Langford-Holt, Sir John	Rost, Peter
Finsberg, Geoffrey (Hampstead)	Le Marchant, Spencer	Royle, Anthony
Fisher, Nigel (Surbiton)	Longden, Sir Gilbert	Russell, Sir Ronald
Fletcher-Cooke, Charles	Loveridge, John	St. John-Stevas, Norman
Fookes, Miss Janet	Luce, R. N.	Scott, Nicholas
Fowler, Norman	MacArthur, Ian	Shaw, Michael (Sc'b'gh & Whitby)
Fox, Marcus	McCrindle, R. A.	Shersby, Michael
Fry, Peter	McMaster, Stanley	Sinclair, Sir George

Skeet, T. H. H.	Taylor, Robert (Croydon, N. W.)	Warren, Kenneth
Smith, Dudley (W'wick & L'mington)	Tebbit, Norman	Wells, John (Maidstone)
Soref, Harold	Temple, John M.	Wilkinson, John
Speed, Keith	Thomas, John Stradling (Monmouth)	Winterton, Nicholas
Spence, John	Thomas, Rt. Hn. Peter (Hendon, S.)	Wolrige-Gordon, Patrick
Sproat, Iain	Thompson, Sir Richard (Croydon, S.)	Wood, Rt. Hn. Richard
Stanbrook, Ivor	Trafford, Dr. Anthony	Woodhouse, Hn. Christopher
Stewart-Smith, Geoffrey (Belper)	Trew, Peter
Stuttaford, Dr. Tom	Turton, Rt. Hn. Sir Robin	TELLERS FOR THE NOES:
Sutcliffe, John	Vaughan, Dr. Gerard	Mr. Hamish Gray and
Tapsell, Peter	Waddington, David	Mr. Bernard Weatherill.
Taylor, Edward M. (G'gow, Cathcart)	Walder, David (Clitheroe)

Question accordingly negatived.

Main Question put forthwith, pursuant to Standing Order No. 39 (Amendment on second or third reading), and agreed to.

Bill accordingly read a Second time and committed to a Standing Committee pursuant to Standing Order No. 40 (Committal of Bills).