RATES

HC Deb 20 November 1974 vol 881 cc1334-462

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Pavitt.]

Mr. Speaker

Before I call the first hon. Member to speak I have something to say about the length of speeches. We have already lost nearly three quarters of an hour. Yesterday in four hours 23 hon. Members from the back benches spoke. The mathematics of that are easy to work out. I hope that hon. Members will try to follow that example. I remind the House that the more the Front Bench speakers are interrupted and give way the fewer are the chances for back benchers to speak.

4.13 p.m.

Mr. Paul Channon (Southend, West)

I shall certainly bear your words in mind, Mr. Speaker, and I am sure the House will be relieved to know that.

Before we get on to the main subject of the debate may I say, since this is the first time I have spoken on topics affecting the environment for two Parliaments, how much pleasure it gives me to return to the topic, and how fortunate I think the Secretary of State and his hon. Friends are in having the Department of Environment to serve them? I have the very highest regard for so many of the advisers who I am sure are serving him as well as they served me and my right hon. and hon. Friends in the past.

I shall attempt to be as courteous to the right hon. Gentleman personally as he was to me and my colleagues on that previous occasion, although I dare say we shall disagree on questions of policy from time to time, possibly beginning even today.

The Opposition take the view that the topic of rates is so important that we have chosen to devote our first Supply Day to it in this Parliament. We believe that urgent action is now necessary both in the short term and in the long term. I shall try to say a few words about that subsequently.

I am sure it will be said more than once from the Government benches during the course of the day, and I accept it, that neither side of the House can pretend to be blameless over the national rates situation. Both sides have a responsibility for the anomalies and history of the rating set-up and the pressures which have now built up to what I believe to be an intolerable point.

The reason the burden of the rates has become so intolerable is that local taxation, is now being paid on far too narrow a base. Far more people are deriving benefit from local services than are actually paying for them. I believe urgent reform is required, and one of the points I wish to put to the Secretary of State is that the timetable for reform is far too slow. Perhaps he will say how he foresees the work of the Layfield Committee and what the timetable will be. Coupled with that, the Secretary of State's flat-rate domestic relief which he introduced this year has made the rate situation much worse than it was before.

I concede that it is extraordinarily difficult to work out a system which would be fair to everyone. It would be virtually impossible to do that, but I believe that the right hon. Gentleman's system has thrown up so many anomalies and so many examples of extortionate rises in rates that he ought not to be surprised at the degree of passionate feeling about rates across the country. It is not surprising in view of what has happened. There has been an overall increase in domestic rates of approximately 35 per cent., but that disguises the astonishing variations within that average. I have no wish to do down the Welsh, but in Wales the domestic rate has gone down 5.1 per cent. this year whereas the metropolitan districts have been asked to bear an extra domestic rate increase of 55 per cent. How can anyone justify that state of affairs when it includes so many obvious unfairnesses and anomalies?

When the Secretary of State produced the rate support grant order he said that there was in it an element of rough justice and that it was almost capricious—I think that was the word he actually used. How right he was. It is certainly rough justice and it is highly capricious.

However, that is past history, and what now worries people is what is going to happen next year. I hope that is what the Government will be telling us very soon. That is what we must concentrate on. Many hon. and right hon. Members will have seen horrifying reports by local authorities which have been trying to estimate next year's rates. I will not read them all out—I have before me a whole sheaf of reports of local authorities—but I will give a few examples. Essex estimates that the domestic rate will go up 40 per cent., Suffolk 40 per cent., Norfolk 35 per cent., Greenwich 70 per cent., Kent nearly 60 per cent., Bedfordshire 60 per cent., Cornwall 45 per cent., and Hereford and Worcester over 50 per cent. —and that last figure is in addition to a rise this year already of 47 per cent.

These are just some of the examples. I have seen reports of London authorities estimating increases of as much as 100 per cent. Croydon anticipates an Increase of 70 per cent., Merton 75 per cent., Bromley 100 per cent., Haringey 60 per cent., and the ILEA precept looks like going up 50 per cent. These are terifying figures in view of what has already happened this year.

The House will have seen today the forecasts and the views expressed in the Daily Express about other examples of what is happening to rates throughout the country. If that is the order of the increase we shall see in the domestic rating system next year, on top of the increases this year, there is the gravest danger that the whole system will break down. There is a danger that people will refuse to pay these enormous increases in rates. I shall not encourage them in that course. As a democratic Conservative, I should oppose people refusing to pay rate increases, just as I know that the Secretary of State, as a democratic Socialist, is against those who do not pay increased rents. That is what he says, and I believe him. Neither I nor any of my hon. Friends will encourage non-payment of increased rates, but it is the responsibility of the Government, who have been in office for 10 months in two Parliaments, to avoid such a situation occurring.

On top of all the increases I have outlined, and the possible increases in rates this year, a large increase will almost certainly result from the Houghton Report on teachers' salaries. I understand from what the Secretary of State for Education and Science said in the House yesterday and last week that we shall have the report, or at least an interim portion of it, as early as December. Substantial increases for teachers will no doubt result. I hope that they do, but they will have to be paid for, and the House will have to make up its mind who should pay. Is it right that the ratepayer should go on paying as much as 39½ per cent. of the burden of teachers' salaries, or should more be transferred to the Exchequer? Over the past year or so the rating system has become so widely disliked, so unfair in its operation and extortionate in its demands, that there is the strongest case for transferring more of the expenditure from local authorities to the Government.

Mrs. Elaine Kellet-Bowman (Lancaster)

Is my hon. Friend aware that the Chief Education Officer for Lancasire said on Friday that, unless there is more money for councils under the rate support grant, when the Houghton Report is implemented there will be the biggest cut-back in education in our county since the war, and probably since the beginning of the century?

Mr. Channon

That highlights the extremely serious situation. I am sure that my hon. Friend and other hon. Members will wish to catch the eye of the Chair to expound on it further. My hon. Friend emphasises my point.

In July the Chancellor of the Exchequer announced a system of interim rate relief that was very much welcomed from the Opposition benches. The House had asked the right hon. Gentleman to introduce such a system, and, unlike some of his colleagues, he had listened to the House. We are grateful for the measures he introduced, although we do not think them adequate.

But we shall have to vote tonight unless we are assured that necessary reforms in the rating system will come about in both the short term and the long term. We are rather suspicious of the Secretary of State. He is keen on public expenditure and on the rating system. I have a sheaf of quotations from speeches by the right hon. Gentleman extolling the virtues of the rating system and of high public expenditure. Therefore, I am not sanguine about what he will tell us. I am surprised that someone with such a logical mind finds this seventeenth-century property tax still to be the ideal solution.

Mr. Kenneth Marks (Manchester, Gorton)

Less than 12 months ago the hon. Gentleman's own Government had an opportunity to change the rating system, and speeches were made in support of the system by Ministers.

Mr. Channon

I said at the beginning of my speech that both sides of the House had a record on the rating situation that could be fairly criticised. I very much regret that a fundamental reform of the rating system was not undertaken many years ago. But the responsibility now rests upon the Government, and the House will be interested to learn what they propose to do about it.

In fact, the rating system is now seen not as a tax on property but as a payment for local authority services. There are no fewer than 9 million net earning householders who pay no rates. That is seen to be unfair. I understand that the social contract is the cornerstone of the Government's policy, and I presume that it is the cornerstone of the Department of the Environment's policy just as much as it is of the policy of other sections of the Government.

Is it not right that there should be an element of social justice for ratepayers as well—not only domestic ratepayers but small shopkeepers, many of whom have had to bear a heavy burden this year and will do so again next year? If it is correct that there should be a rent freeze for council tenants, what about other ratepayers? If it is all right for the tenants, why should not other people get help with their rates? [Interruption.] The hon. Gentleman's party introduced a rent freeze.

The Minister of State, Department of the Environment (Mr. Denis Howell)

Commercial rents.

Mr. Channon

We introduced that, not the Labour Government.

There should also be an element of social justice for young couples trying to buy their own house on a mortgage, small shopkeepers, retired couples on small fixed incomes—all those who find the rate burden very heavy. Presumably, they, too, come under the social contract. They are useful people. Why should they not be helped?

I understand that the Layfield Committee is not to report until the end of next year. Its timetable is too slow. Although I was not present, I understand that in the debate in the Committee considering the General Rate Bill yesterday the Minister speaking on behalf of the Government said that the Layfield Committee was meeting only once a fortnight. I acknowledge that those serving on the committee are busy and responsible men, with wide interests, but the matter is so urgent that I believe that many hon. Members on both sides of the House will ask the Secretary of State to expedite the committee's sittings.

What will happen when the committee has produced its report? When shall we have legislation? I am told that we are not likely to have it until about 1977–78, and perhaps even 1979. What is the timetable for reform of the rating system?

The right hon. Gentleman and his Department have decided to postpone domestic rating revaluation from 1978. It is rather curious that they do not like the idea of having revaluation then. Perhaps all sorts of things will happen in 1978, and that is why we are not to have revaluation. I understand that the Under-Secretary, speaking for the Government, said yesterday that he was prepared to have revaluation a year earlier than had been announced. The House should know the exact timetable. If the present system is to continue, it will become even more unfair if there is no revaluation.

The Chancellor of the Exchequer told us in his Budget Statement a short time ago that local government expenditure had been increasing in recent years by 7 per cent. or 8 per cent. in real terms. That is a figure that I do not think can continue, and I believe that he thinks that it cannot continue.

Is it the fact that the Government's policy is that local government spending should not rise in real terms by more than the 2.75 per cent. figure the Chancellor gave the public spending as a whole? What will be the proportion of central Government and local government expenditure? If the percentage of real increase that I have mentioned is correct, will the Secretary of State make that clear to us today, and tell us the implications of such an increase on average for ratepayers, and how he proposes to secure that such a target is adhered to by local councils?

My right hon. Friend the Member for Carshalton (Mr. Carr) has already expressed doubts whether public expenditure as a whole should rise at all in real terms in our present economic circumstances. That goes for that part of public expenditure accounted for by local government, which the Chancellor told us in his Budget speech is now 30 per cent. of total public spending.

Some better means of bringing local authority spending under more effective control is essential both for the protection of ratepayers and for the effective fighting of inflation. The Government will shortly be introducing a rate support grant order. For the current year the Exchequer rate support grant was intended to meet 60.5 per cent. of the agreed local government spending on the relevant services, leaving aside extra relief eventually provided by the Government which relieved domestic ratepayers of 60 per cent. of any increase in their rates over and above a 20 per cent. increase. What proportion of agreed local government spending is it intended that the rate support grant should account for in 1975–76?

It is essential that we have a debate this week before final decisions are made so that the views of the House can be made known to the Government before they come forward with the rate support grant order. I ask the right hon. Gentleman: by how much in real terms do the Government expect local government spending to rise next year? What are the means by which the Government will ensure that local government spending does not increase above the target they have set for it?

What proportion of agreed local government spending in 1975–76 will be met by Exchequer rate support grant and what is to be the domestic rate element for 1975–76? This determines how much special help will go to householders. Is the right hon. Gentleman to continue with his flat-rate system of 13p in the pound for England and 33.5p for Wales or are the Government prepared to accept that my right hon. Friends are right in their proposals for a variable domestic element to take account of differing circumstances in different parts of the country?

Can the right hon. Gentleman assure us that help will be given to local authorities through an increase order so that no local authority will have to start off with a deficit next year, which will compound the already difficult problems facing them in the rate burden for next year? The aim surely must be to ensure, by domestic rate relief, that no householder faces excessive rate increases, whether he lives in town or country, whether in a Labour-controlled or Conservative-controlled area. No householder should be made to face an excessive rate burden.

What action do the Government intend to take to prevent excessive rate increases next year? During the last election we put forward positive proposals on the rating system. [Laughter.] If hon. Members think it is a laughing matter they are in for a nasty shock when they get their constituents' reactions.

Mrs. Renée Short (Wolverhampton, North-East)

Tell us what you would have done.

Mr. Channon

That is what I hope to do. It is very nice to have the hon. Lady here. I hope that she will not walk out during my speech at any rate.

Mrs. Short

No. I shall stay.

Mr. Channon

I do not propose to set out in this debate our arguments for the complete abolition of household rates, although it is the Conservative Party's view that in the end that must be done. My purpose today is to urge the Government to take immediate action as from April next. As we suggested to the country, and I suggest again to the House, the first step is to transfer from the rates to the Exchequer the costs of teachers' salaries and more of the costs of the police and fire services. Last year the total cost of teachers' salaries was £1,400 million. Local authorities had to find 40 per cent. If action were taken along the lines I suggest there would be a worthwhile saving to all ratepayers, whether householders or commercial, small traders, shopkeepers or industrialists. It is absolutely essential that the Government do this if we are to avoid the breakdown of the whole domestic rating system.

Mrs. Lena Jeger (Holborn and St. Pancras, South)

If this transfer of responsibility for teachers' salaries takes place, does the hon. Gentleman envisage that local authorities would still retain control over the number of teachers they employ and the distribution and allocation of those teachers?

Mr. Channon

Yes. The Exchequer should take over the responsibility of paying teachers' salaries up to an agreed quota. If local authorities want to employ more teachers, that is a matter for them. Certainly local authorities should, in the last resort, keep their freedom. The local education authority should run its own affairs. It is unlikely that there should be any real increase in public expenditure of any kind at present. There are many desirable things in Government and local government we should like to see which cannot be afforded at the moment.

Before estimating the increase in real expenditure the Government have to tell us what is the rate of inflation. Is it 8.4 per cent. still, or 8.73 per cent., as it was a couple of days ago, or, irritatingly enough, has it now leapt to 26 per cent. with the publication of this month's retail price index? What is the rate of inflation on which the Government are making their estimate before deciding upon the real increase in public expenditure? What will be the increase in expenditure on gas, electricity, rail fares, coal, and all the other things which will rise in price in a short time?

During the General Election campaign Labour Ministers seemed to regard as inflationary the suggestion that we should transfer teachers' salaries to Government expenditure. The fact is that it would not add one penny piece to public spending as a whole. What it would do is share out the burden more fairly among the taxpayers as a whole, instead of it being placed only on those taxpayers who are ratepayers.

I recognise that if this were to be done means would have to be found of ensuring that local authorities passed on the benefit to ratepayers. We must find the mechanism for ensuring that local government spending is geared to people's ability to pay. It is true that local authority spending has increased a great deal faster than public spending as a whole. That is perhaps because it is so much more labour-intensive. But is that not where the social contract comes in?

As we understand it, and if our understandings are wrong the Government will no doubt enlighten us, the social contract means that, except for special cases, wage increases should not go beyond price increases. All of us agree that teachers are a special case following the Houghton Report. Local government spending can surely be taken care of if the Government accept the proposal to transfer the cost of teachers' salaries. If that were to be done and the social contract adhered to, it would be possible to agree that local authority spending in 1975–76 should not exceed in real terms the level of the previous year, or at any rate, if it does exceed it, should do so by only a small margin.

Of course, an important part of this would be the requirement that the major trade unions would have to set an example in wage demands, making sure that they kept those demands within the social contract, because if one section of workers received an excessive increase in wages, it would be difficult to persuade local government employees to keep down their wage and salary demands to reasonable proportions. That is surely what the social contract is about.

Is it not right to consider that the correct approach is to gear local government spending, until we get over our present economic crisis, to increases in the retail price index? More effective control of this spending is important for domestic ratepayers, shopkeepers and small traders. The Budget has done little, if anything, for them, yet the small businessmen have seen taxes being put up and rates rising. He will soon have to pay much higher contributions if he is self-employed and there will be a further increase in national insurance contributions for employers.

Those are heavy burdens, and the Government know that the rate of bankruptcies among small businesses is, unfortunately, running at a high level. It will run at an even higher level next year unless something is done to help with rates. I know that businessmen are allowed to set their rates off against taxation but this by no means gets over the problem facing the small trader. On 12th November the Chancellor gave some relief to companies over the question of stocks. He said that he could not deal with the whole range of companies and his immediate relief would be confined to those who had a closing stock of at least £25,000. That means that some small businesses will receive no relief from the stock allowance which the right hon. Gentleman is proposing, at any rate for this year, although they may next year. That makes it all the more necessary that there should be some element of rating relief for the small shopkeeper facing these burdens.

Both parties when in Government are guilty of calling for the utmost economy while at the same time sending out circulars to local authorities telling them to take quick action on something and spend a great deal more money on something else. We must all accept, until we get over our present economic difficulties, that a number of desirable improvements cannot take place. There is no difference between the two sides of the House, or at least between responsible Members, on this issue. That makes it all the more important for us to get our priorities right.

That is why, at a time when rate burdens are so high and Government expenditure needs careful watching, it is utterly intolerable that the Government should press ahead with ludicrous, unnecessary and expensive schemes such as the whole of their land municipalisation proposal. [HON. MEMBERS: "The Channel Tunnel."] Hon Gentlemen opposite can fight their own battles about that.

Local authorities have not got the skilled staff necessary to carry it out. The cost of the scheme has been estimated by some observers to be as high as £500 million a year. Even if that is a massive over-estimate and it is as low as £50 million a year, that is still too much. It is no good the Government saying that in seven to eight years the money will be coming in to local councils from such a scheme. The money is needed now, not in seven to eight years. That is one of the many reasons why it is ridiculous.

It is also ridiculous that local authorities should waste hundreds of millions of pounds of the taxpayers' and ratepayers' money on the municipalisation of rented property to serve the party political dogmas of right hon. and hon. Gentlemen opposite.

Then we come to the Housing, Rents and Subsidies Bill, about which the right hon. Gentleman and I will have happy memories—or memories, at any rate. Is it right to revert to a system which allowed those living in council houses to pay lower rents and to have those rents subsidised frequently by people worse off than themselves living in other accommodation? I should have thought that that system was out of date. I am sure that everyone would like to see generous rebates for poor families who cannot afford rents, but it is ridiculous that ratepayers should subsidise those who do not need help.

It is a wrong use of public money to press ahead with turning all State secondary schools into comprehensive schools at massive cost. It is also a waste of money for the Government to press ahead now with the abolition of private beds in National Health Service hospitals at the expense of £30 million a year.

These are economies which can be made by either central Government or local government. Other economies could also be made. We have all heard stories—no doubt sometimes exaggerated—of local authorities with swollen staffs and all the other things which are alleged. What happened to the inquiries which were set in hand by my right hon. Friend the Member for Crosby (Mr. Page) regarding staffing in local authorities? What investigation is the Department carrying out at present?

I know that the right hon. Gentleman will seek to argue that the reorganisation of local government is to blame. The truth is that all parties were agreed on the need to reform local government. [Interruption.] If the present Government's reform had taken place instead of ours, there would still have been the same temptation on the newly created local authorities to indulge in a measure of empire building in this way. The problem —it would have remained whichever reform went through—is to ensure that this tendency is resisted. I hope that the Government are keeping a careful watch on this matter. This is more a matter of feeling. This is not what is causing the high rise in rates, but it is the kind of thing that irritates people, although I accept that it is the detail rather than the major factors which is causing increases in rates.

The last action taken by the right hon. Gentleman only a week or two ago has, in my view, although quantitatively not crucial, qualitatively made the situation worse. It is scandalous that ratepayers may be asked to pay extra money to bail out councillors who refuse to carry out their legal duties under the Housing Finance Act not through error, as the Secretary of State said—because they would not be surcharged if they had made an error—but because they deliberately chose to take the course of action that they took, did not use reasonable grounds for delay, were encouraged to do so by some hon. Gentlemen, and thereby broke the law. [HON. MEMBERS: "Right hon. Gentlemen."] No, certainly not this right hon. Gentleman.

Mrs. Kellett-Bowman

The Leader of the House.

Mr. Channon

That is a different matter.

Ratepayers will deeply resent having to pay for the mistakes of councillors who deliberately break the law knowing the consequences if they do so. I suggest that that is a matter that the House should reject when the time comes.

The Social contract covers the big battalions. We are told by hon. Gentlemen opposite that it covers many people —no doubt all the hospital workers and the railwaymen. We shall see whether it covers the miners. If it is to mean anything, I hope it will be a contract also with the ratepayer, the self-employed, and everyone who has to face the terrible burden of inflation.

In the short term immediate action is required to take away some of the rate burden. We suggest that it should be done through the removal of teachers' salaries from the rates to the Government. That is the short-term action that is pressing this year, this autumn, and should be carried out without delay.

In the long term we believe that the only solution is the complete abolition of domestic rating and its replacement by a much fairer system of taxation based on people's ability to pay. That is what we shall be asking for, however long this Parliament lasts, and when we are returned to office that is what we shall implement.

4.45 p.m.

The Secretary of State for the Environment (Mr. Anthony Crosland)

I congratulate the hon. Member for Southend, West (Mr. Channon) on his return to the House after what I understand has been a particularly painful and unpleasant bout of illness. I am glad to see him fully recovered.

I also congratulate the hon. Gentleman on what I take, and hope, to be promotion to a new Front Bench position. Certainly he has sloughed off both the memories and the responsibilities of Government quickly enough, because a large part of his speech had nothing to do with the coming rate support grant negotiations. I hope that the hon. Gentleman stays there for a little time, if only because we have become irredeemably confused by the restless instability of Opposition Front Bench spokesmen.

In recent weeks the hon. Members for Hornsey (Mr. Rossi), Chelsea (Mr. Scott), Shipley (Mr. Fox), Honiton (Mr. Emery) and Bury St. Edmunds (Mr. Griffiths) have popped up and down, now on the Front Bench, now on the back bench. They move from back to Front and Front to back and Front to Front. There must be some system of weekly promotion and demotion in the new democratic Conservative Party. We used to hear a great deal about the Tory magic circle. It seems that we now have the Tory magic roundabout. Please may we have some stability of deployment in the interests of national sanity before we all become totally giddy and cross-eyed?

Today, much as we like to see the hon. Member for Southend, West, we had looked forward expectantly to hearing from the right hon. Member for Finchley (Mrs. Thatcher). After all, it was she who, just before the election, made the ex cathedra announcement on the aboli- tion of the rating system. It was the right hon. Lady, not the hon. Gentleman, who was in the Tory Cabinet which bequeathed to us the present frightful rating crisis. Indeed, as Secretary of State for Education and Science, the right hon. Lady was exceptionally closely involved in rate suport grant matters, and her views would have commanded instant and respectful attention in the Cabinet. Therefore, we would have liked to ask her one or two gentle, courteous questions this afternoon.

For example, does the right hon. Lady suffer from chronic amnesia about what happened in the Cabinet of which she was so elegant an adornment? Was she in fact pressing, day in, day out, with persistent doggedness for the abolition of rates, only to be overruled by our old friends, those two stolid opponents of change, the right hon. Member for Worcester (Mr. Walker) and the right hon. and learned Member for Hexham (Mr. Rippon)? If the latter was the case, she has turned the tables on them now because she appears to be in the leadership race and they are not.

The trouble is that we shall never know the truth. The right hon. Lady has flown away and upwards, leaving as a souvenir to her meteoric passage only a characteristically charming photograph on the front page of the Local Government Chronicle which the ungallant editor chose to caption, The Unacceptable Face of the Conservative Party. That is very unchivalrous.

This debate could hardly be more topical. It takes place right in the middle of the crucial final stages of the negotiations with the local authority associations over the size and distribution of next year's rate support grant. Discussions have already continued for some months. The Government's formal proposals have now been put to the associations, and there was a first discussion of them at official level only yesterday. I shall have my final meeting with the association members—the so-called statutory meeting —next Tuesday, 26th November.

The right hon. Gentleman the Member for Crosby (Mr. Page) has sometimes referred to the day of the statutory meeting as the local authority Budget Day. That is an apt description. Thousands of millions of pounds of public money are at stake. The outcome, like the outcome of a Budget proper, will affect the lives of almost all our citizens. For different reasons, preparations for the local government budget have also to be carried out in conditions of strict confidentiality. This is not because great fortunes will be made, or national security threatened, if details of the settlement leak out in advance. The reasons are less spectacular than that.

There is, first, the obvious and general point that no party to any negotiation—be he employer, trade unionist or anyone else—can ever announce his final position in advance. The progress of negotiation could be seriously hampered if one side or the other were to take up a position in public at the outset. The parties would soon become entrenched in their positions, and it would then require a huge amount of time and effort for them to extricate themselves.

Secondly, apart from this general point, the rate support grant negotiations present particular difficulties. All local authorities are affected by their outcome. But each authority has its own special problems and needs and is not slow to suggest that they deserve priority over all other authorities' special problems and needs. Authorities are represented in the negotiations by their national associations. The association have to strike a balance between the often conflicting interests of their individual members. That requires some immensely difficult judgments which are bound to leave some proportion of their membership dissatisfied. The pressures operating on the associations are enormous. They would become intolerable if the final stages of the negotiations were to be carried out in a blaze of publicity.

If Conservative hon. Members press the case of the peculiarly deserving local authorities that all of us have in our own constituencies I shall not be able to satisfy them today even if the proposals which I have put to the associations happen to be beneficial to the authorities in question. Likewise—and I am sure the hon. Member for Southend, West will not be surprised to hear this—I shall not be able to tell the House today how much grant I am proposing to give for next year or what increase I am ready to make in this year's grant total.

Ex-Environment Ministers like the hon. Member for Southend, West will not be surprised to hear that never before—at least, not since rate support grant was introduced—have we had a major rates debate in the middle of the statutory negotiations. I do not complain of this in the slightest. Nor would I dream of impugning, as some cynical observers have done, the motives of the Opposition in initiating this debate. As honourable men and women, are they not bound by the pledge of the right hon. Lady the Member for Finchley to abolish the rating system? That was a pledge which shone out, in the otherwise murky light of a hard-fought election campaign, as a shining example of non-party-political moral purity along with the even purer 9½ per cent.

Of course, I accept that it is solely the Opposition's genuine concern with the plight of ratepayers which has prompted them to initiate this debate now. Nothing, I am absolutely certain, could be further from their minds than any desire to make political capital out of the rating situation. After all, the next election is some time away. I am only astonished that they should not have tabled a specific motion. Given the previous record of the Conservative Party in these matters, I suppose that the Shadow Cabinet found it impossible to draft a form of words that would not have been torn to shreds by my right hon. and hon. Friends.

Let me make it clear beyond any shadow of doubt that I and my right hon and hon. Friends are as deeply concerned as anyone on the Opposition benches at the magnitude of the crisis—crisis is not too strong a word—affecting local authorities' finances and the appalling consequences it would have for next year's rates if nothing were done to help. Both as a Minister and as an MP whose constituents faced a 40 per cent rate increase this year—less, I know, than in many other areas—I have been profoundly conscious of the problems arising from the situation which I inherited in March.

Lest we forget, I must remind the House of the factors which contributed to this situation. First, whatever the hon. Member for Southend, West may say, local authorities were subjected to a form of local government reorganisation which we in Opposition predicted would be expensive and extravagant, and which has proved so. It is no good saying that the kind of reorganisation we wanted on a unitary basis would have been as expensive. Secondly, they were required to include in their rate an element over which they had no control whatsoever—namely, the water charges set by that equally extravagant creation, the new regional water organisation.

Next, the new local authorities were told by the right hon. and learned Gentleman the Member for Hexham to keep their eyes tightly shut against the realities of the oil crisis and world-wide inflation, and to rate for only a 9 per cent. increase in pay and prices over the year. The last straw was the promise which the right hon. and learned Gentleman made to the House on their behalf that … the national average increase …"— that is the increase in domestic rates— should accordingly be about 3 per cent."—[OFFICIAL REPORT, 22nd January 1974; Vol. 867, c. 1469.] Even taken singly, none of these demands was realistic. In combination, they added up to a nightmarish fantasy.

Something had to give. Domestic rates did not go up by 3 per cent.; they went up by an average of 30 per cent.—or they would have done had it not been for the special relief scheme which we introduced in July.

Mr. Michael Latham (Melton)

As the right hon. Gentleman is explaining why the rates are going up, will he say something about the order that he introduced in March which discriminated against rural areas? Does he accept that the July measures were specifically necessary to undo that discrimination?

Mr. Crosland

I am talking, I hope reasonably clearly, about the national total increase in the rate bill. The March order had no effect on the national rate bill. It affected only the distribution. Tragically, many local authority treasurers heeded the then Government's call to rate for only 9 per cent. inflation. That is one of the deepest reasons for our trouble today.

The new authorities—many of which, to add to their problems, inherited little or nothing in the way of balances from their predecessors—have been faced with a yawning chasm between their income and expenditure and, as we all know from our own areas, have been forced into emergency bridging work by way of massive short-term borrowing. As with all emergency measures, a temporary respite has been gained. But the fundamental problem is untouched. This year's debts have to be repaid, with interest, out of next year's income. That is what lies behind the grim warnings which we are hearing from Treasurers every day.

I turn to the wider question on which the hon. Member for Southend, West spent much of his time, and reasonably so—namely, the future of the rating system. The hon. Gentleman said that our timetable for the consideration of this matter was too slow. I shall have something to say about timetables.

In recent years there has been a growing revolt amongst ratepayers against the entire rating system. It is now widely regarded as inequitable between individuals, unjust between households and harsh—even oppressive—for ratepayers in general. The Conservative Government of 1970–74 responded to this discontent with all the sense of urgency of an ageing snail. It was not that they never considered the matter. They considered it and considered it and considered it and considered it.

First, they published their July 1971 Green Paper on the future of local government finance. It was an impressive intellectual exercise. One by one, every conceivable major change in the rating system was subjected to an elegant analysis. One by one every suggestion of possible lifelines for the unfortunate ratepayer was dismissed and pooh-poohed. The right hon. Lady the member for Finchley was a member of the Cabinet at the time.

Then they settled down to consider the Green Paper—

Mr. Graham Page (Crosby)

All that the Green Paper did was to set out the pros and cons of each item which could raise money for rates. It did not dismiss any item but gave a lead to important consultation and discussion.

Mr. Crosland

Very well. Let us consider what happened after the Green Paper was published.

The Government—I pay them tribute for this—settled down to consider the Green Paper. They considered it and considered it and considered it and considered it. So deep was their meditation on their own writings that it took two solid years to complete. Meanwhile the loval government world chafed with impatience. Then the Conservative Government, of which the right hon. Member for Finchley and the right hon. Member for Crosby were both eminent Members, produced their consultation paper on local government finance. It was supposed to "finalise this matter". It represented the full flowering of two years of Conservative Government thinking on rates. On reading the consultation paper we discovered what finalisation meant. The paper was so devoid of positive thought that, in retrospect, it made even the Green Paper seem like a masterpiece of decisive and daring innovation.

We in opposition tried during this period to express and articulate the ratepayers' discontent. We did not commit ourselves to abolishing the rating system at a stroke, but we continuously urged a more positive attitude on the Government. My hon. Friend the Member for Birmingham, Small Heath (Mr. Howell) and others of my colleagues asked "Why should we not at least examine the idea of a local income tax?" The Government of which the right hon. Lady the Member for Finchley was a member said "No". We asked "Why should we not at least consider a local sales tax?" The Government of which the right hon. Lady the Member for Finchley was a member said "No". We asked about a tourist tax, about lotteries, and about petrol duty, and the Government of which the right hon. Lady the Member for Finchley was a member said "No", "No", and "No" again.

Mr. Graham Page

The Government of which the right hon. Gentleman is a member have said "No" to lotteries.

Mr. Crosland

I shall mention the question of the Lotteries Bill in a moment.

"No reform", said the right hon. and learned Member for Hexham. In the Second Reading debate on the Local Government Bll on 12th November last year, he said of our amendment, which criticised 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. He went on to say: The system of rates, the local authorities' own tax, is well tried, well known and easy and cheap to administer. These are major advantages …".—[OFFICIAL REPORT, 12th November 1973; Vol. 863, c. 36.] The right hon. Member for Crosby went a good deal further. "Not even a Royal Commission or an inquiry", he said. I quote his words: it would be both disastrous and defeatist"— this is typical of the strong language he often uses in the House— to put the whole matter back into the melting pot". So I wish him well with his Lotteries Bill.

The right hon. Gentleman went still further. He said that there would be no transfer of expenditure, such as teachers' salaries, to the Exchequer. I quote him: We should hesitate"— the right hon. Gentleman is a good hesitater, or at least he was when he was a Minister— 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."—[OFFICIAL REPORT, 12th November 1973; Vol. 863, c. 148–50.] So the Tory Government were rigidly, adamantly and insistently opposed to any suggestion for relieving the poor ratepayer. It required the General Election to put the Conservatives on the road to Damascus, and the prospect of a second election—when they were in deep political trouble—to complete their conversion. Overnight—on 28th October, to be precise—the "No, no, no, no's" of the Conservatives' years in office were replaced by the right hon. Lady's "Yes, yes, yes's" of despairing opposition.

We have more respect for principle and constituency. In opposition we showed, unlike the right hon. Member for Crosby, that we understood the strong and natural feelings of the ratepayer, the feelings dismissed so contemptuously by Environment Ministers in the Conservative Government. We also showed that we were aware of the difficulties, and that is why in government we have set up the Layfield inquiry—independent, high-powered and representative of all shades of opinion and experience. If Layfield comes up with a viable alternative to rates, no one will be more delighted than I shall be. The hon. Member for Southend, West asked about the timetable. The inquiry is hard at work. As anyone familiar with committees will know, it is meeting once a fortnight because it is taking written evidence before it takes oral evidence.

But we are not prepared to be stampeded into instant solutions or to stand on our heads in an opportunist attempt to buy popularity. Just as we refused to compete in an electoral Dutch auction over 9½ per cent. mortgages, so also have we refused to promise the abolition of the rates unless and until we have a proven alternative. We cannot and will not suddenly announce a botched and hurried solution to this problem which, as hon. Members opposite know perfectly well—I suspect they have a certain amount of sympathy with what I am saying—has baffled successive Governments for so many years.

In passing, may I say that I wish that the hon. Member for Southend, West had clarified the Opposition's current attitude to the Layfield inquiry. In June the right hon. Lady the Member for Finchley welcomed the fact that we were setting up an inquiry, but only a few weeks later—and the hon. Member for Southend, West repeated this today—she made her electioneering announcement which was designed to pre-empt altogether the central question before such an inquiry. The hon. Gentleman has pre-empted it again today. I remind the House, incidentally, that the inquiry has on it two very respected and well known Conservative local government figures in Dame Kathleen Ollerenshaw and Lord Ridley.

I hope that now that the pressure of electioneering is off the hon. Member who winds up for the Opposition will withdraw on behalf of his party all the conflicting pledges made by his predecessors so that Layfield can have a clear and unprejudiced run over the ground.

I return to the immediate crisis facing us. Any measure to restrict an intolerable rate increase next year can succeed, as the hon. Member for Southend, West clearly said, only if local government plays its part. That means, as my right hon. Friend the Chancellor of the Exchequer told the House in his Budget Statement, that we must ask local authorities to keep the growth in their services to the minimum compatible with inescapable commitments. This is no sudden slamming on of the brakes of the sort which Mr. Anthony Barber attempted so crudely last December. I have for months past taken every opportunity to stress to local government how grim were the prospects for next year's growth in spending. Decisions will have to be taken of a sort which none of us will welcome. But we shall give local authorities ample guidance in good time on what is required.

I repeat that I greatly welcome the attention which the House is now giving to the question of local government finance. Up to about two years ago our debates on local government finance and the rate support grant were attended by about five Members on average on each side of the House. I am delighted to see the change. I have explained—and the hon. Member for Southend, West understands this perfectly well, as does his right hon. Friend—why the singular timing of this debate prevents us from being as forthcoming on detail as we would like. But it will not prevent us from paying the closest attention to all that is said today.

I cannot promise either local authorities or ratepayers an easy time next year. I have no doubt that I shall be a highly unpopular man next spring. I can make only one pledge—that I approach these problems with a far greater sense of urgency than the Conservative Party showed in government and a far greater sense of responsibility than it has shown in opposition.

5.10 p.m.

Mr. David Madel (Bedfordshire, South)

The Secretary of State told us at the start of his speech that it was a rather unusual time of year to hold a debate on rates because he was right in the middle of intricate negotiations for next year's rate support grant system. He also said that there were enormous pressures on local authorities, and that it would be wrong for those discussions to be published at this time.

The right hon. Gentleman will naturally expect me and those of my hon. Friends who catch Mr. Speaker's eye to say something about the special problems of our own particular counties.

The Secretary of State also spoke about reform of the rating system and went through some of the suggestions in the July 1971 Green Paper. I assume that he will leave answers to questions on these matters to his right hon. Friend to deal with in the concluding speech for the Government. I have no doubt that during the debate many questions will arise on the rate support grant, and on interim changes to the system which would help ratepayers from next April.

The Secretary of State pointed out that he came into office on 1st March at a very difficult time so far as negotiations on the rate support grant were concerned. The General Election campaign of three and a half weeks in February meant that a number of meetings between the then Secretary of State for the Environment, my right hon. and learned Friend the Member for Hexham (Mr. Rippon), and county treasurers had to be postponed. Many people wondered where my right hon. and learned Friend had left off and the present Secretary of State had taken over, because no actual rates had been fixed in the middle of the election campaign, and, therefore, the Secretary of State had to move very quickly in fixing the domestic rate support element. He described his 13p in the pound as an element of rough justice which benefited some authorities and sharply discriminated against others. But since then the Government have got a fuller picture of the system. They have gone deeper into how the rating system is affecting people and they have been fully cognizant about the huge rate increases this year and about what people have had to pay over and above what they paid last year.

The Secretary of State referred to our debates on the reform of the rating system. He should have been a little fairer on this. In the debate in February 1973, initiated by the hon. Member for Derby, North (Mr. Whitehead), both sides of the House strongly pressed my right hon. Friend the Member for Crosby (Mr. Page) to change the rating system.

One should say that there is a limit to the amount of party political juice that can be squeezed out of the question of reform of the rating system. We must differentiate and remember that there are a number of councillors who are independents in local elections but change into other political animals for General Elections. It would be wrong to say that the argument for reform of the rating system has been confined to one particular party. It has been an across-the-board movement in this country.

We have only to look at the composition of the rate protest action groups that come into play from March or April. These groups are composed of people from all political parties. It is therefore wrong to assume that one political party has a monopoly in pressing for a change in the rating system. We have merely to read the debates in the last Parliament to see that there was pressure on this matter from back benchers on both sides of the House.

The Secretary of State said that there was hostility and suspicion over the number of staffs local authorities were employing, and the Chancellor of the Exchequer mentioned this in his Budget speech. We ought to remember that had the Redcliffe-Maud report been adopted larger units would have come into play, and there is no certainty that even more staff would not have been employed.

Another important matter to consider is the protest over the change made by the Conservative Government in local government in 1972. Much of the protest was contained in phrases such as "You are taking away local democracy. We are going to feel more remote from the place where the decisions are made." Yet the Redcliffe-Maud proposals would have made people feel even more remote than they are.

This is not the time to talk about that, but we in the House must grasp the nettle of whether local councillors should be full time and whether, in view of the great difficulties in administering local councils, we ought or ought not to pay councillors for their work. As I say, this is not the time to talk about this in detail, but anxiety and suspicion over local government is very much tied up with the size of the new authorities that came into being in 1972. Even bigger authorities would have come into being had the Redcliffe-Maude proposals been adopted completely.

The Secretary of State mentioned the Green Paper. That is all we have to go on when we talk in our speeches about how we might change the rating system. Paragraph 11 on page 2 of the Green Paper goes to the heart of the matter. Referring to rates it states: But they have defects too. Their effect on individual ratepayers in some cases bears little relationship to ability to pay. The yield does not have the buoyancy required to keep pace with the growth of services. Paragraph 17 on page 3 of the Green Paper states: there are three—and only three—possible ways of filling the gap referred to in paragraph 14: either property occupiers must pay more, or the national taxpayer must bear an increasing proportion of local expenditure; or new and buoyant sources of local revenue must be found. It is little wonder that the overwhelming majority of people accept that probably the national taxpayer will have to bear an increasing proportion of local expenditure, because on the whole national taxes tend to be based on a person's ability to pay. I do not say that that is totally the case, but on the whole it tends to be so. Therefore, we are moving towards closer consideration of some form of local income tax. For example, as the Secretary of State said, the 1971 Green Paper carefully examined some of the arguments and possibilities for changing the rating system and then proceeded to turn them down. Two of the possibilities that have gone down the drain were a motor fuel duty and a motor vehicle duty. Those revenue raisers would now clash with a centrally directed energy policy.

A local sales tax was also mentioned in the Green Paper. The argument in 1971 and 1972 was that the buoyancy of the tax would help. I should have thought that in view of the possible low growth in expenditure the buoyancy argument has been knocked on the head.

There is also the possibility of local value added tax to consider. But on that I suggest that, first, we do not yet have enough experience of national VAT, and, secondly, the extra work for retailers would be unacceptable. Thirdly, it looks as if the Chancellor of the Exchequer is moving towards a three-tier VAT system. We have already moved towards a two-tier system, with the VAT rate on petrol. I should have thought that the local sales tax idea had also gone down the drain.

The Green Paper mentions on page 21 local employment tax, but knocks it down—now the argument is even more effective—when it states that a local employment tax could well conflict with the Government's regional policy, which is clearly more vital now in view of a possible rise in unemployment.

Thus, the Layfield Committee could save itself a lot of work and heart-searching, because basically the argument is coming down to some form of local income tax. Page 15 of the Green Paper, referring to a local income tax, shows that a number of countries comparable with ours, so far as industrialisation is concerned—the United States, Canada. Germany and Italy—have a form of local income tax. Such a tax would be imperfect to begin with and would take time to develop, but I am convinced that it would be a fairer system of raising money locally. This is probably what we are moving towards.

I always feel that when a Government publish a Green Paper those who have done the research work are on the whole pretty well prepared to implement all or some of the suggestions that have been put into the Green Paper after consultation with Ministers. I do not think that the argument that more time is needed to consider a new type of tax system holds much water. We have already looked into the matter. There must have been an enormous amount of research carried out by the Government Department concerned. I hope that the Layfield Committee will take this up and that we shall start moving towards a fairer system.

I turn now to the question of sewerage charges. The Minister of State, Department of the Environment wrote to me on 7th June stating: It is intended that these interim arrangements should come to an end quickly although I regret that no change and no retrospective adjustment will be practicable this year. I understand that the water authorities are already setting in hand arrangements with the local authorities in their respective areas to identify as soon as possible those properties which are not served by main sewers. I hope that in the concluding speech for the Government something will be said about this and about whether those interim measures, which were mightily unpopular, are coming to an end.

It is inevitable that hon. Members should spend a few moments on their own county's position. Bedfordshire's rate bill this year is £53.28 million. The estimate for next year is that rates and rate support grant will be £76.80 million. The policy and resource committee of Bedfordshire County Council had this to say: The estimate is tentative and necessarily based upon a number of assumptions. The full extent of inflation, even in 1974–75, is not yet known; nor is the outcome of pay negotiations including that for teachers. I endorse what my hon. Friend the Member for Southend, West (Mr. Channon) said about transferring teachers' salaries to the Exchequer. The time has come to change the London allowance into a South-East allowance. If counties like Bedfordshire are to have extensive London overspill they must pay teachers the rates that are paid in London. But that cannot be done with the present rating system. That is another reason which may come out of the Houghton Committee for transferring teachers' salaries from local authorities to the Exchequer from next April. That would provide an element of relief.

I will say a few words about the needs element, which has been gone into carefully in the rate support grant negotiations. On page 40 in paragraph 4.17 of the Green Paper there is a list of needs which includes total population, numbers of children under five years of age and persons over 65. Missing from that list is "rapid rise in population". The needs element seems to preclude that being taken into account, and counties such as Bedfordshire which have a rapidly rising population are not benefiting properly from the rate support system as it operates at present.

I realise that the Secretary of State cannot go into full detail at this stage, but I hope that in the negotiations proper account is being taken of the counties which are doing a great deal to help London with its housing problems, employment and industrial expansion. I hope that from next April the Government will come forward with some form of interim relief. If they do not do that they will be heading for a big storm from the ratepayers.

The Secretary of State said that he would listen carefully to everything that was said in this debate. I hope that at least on teachers' salaries and on the sewerage rate row he will be able to give ratepayers some relief from next April. It is vitally needed.

5.22 p.m.

Mr. Michael Stewart (Fulham)

Local government finance was a vexed question before the country ran into its present economic difficulties, and it will be a vexed question after those difficulties have been overcome. What I have to say is related not to our immediate crisis but to the longer-term problems of local government finance. I hope and believe that within a few years' time the country will have got out of its present difficulties and that we shall then be in a position, as industrial States usually are, to expect the total wealth of the country to increase steadily, though not spectacularly, year after year.

A community that is getting richer has both the power and the duty to increase those services such as education, housing, welfare and amenity which characterise a civilised society. A poor, primitive community can make only the most minimal provision for the old, the unfortunate and the sick. As society gets richer it should be prepared to spend not only more absolutely but a bigger proportion of its total wealth on those services. That is what being civilised means.

Our problem has been that the services which characterise a civilised society are services which we have required local authorities to play a great part and we have equipped them with a system of raising the money for those services which is inadequate and unfair. As many of those services involve the purchase of land, local authorities have been particularly vulnerable to the effects of land profiteering, that land profiteering which the Conservative Party has continually championed and kept alive and which, to judge from the Opposition Front Bench speech today, it proposes still to keep alive. That makes nonsense of a great deal of the Conservative Party's attempt to pose as the ratepayers' friend.

If we do not make radical changes we shall get into the position where the country as whole can afford improved services but the local authorities which are required to improve them cannot afford to do so without imposing an intolerable burden on some of their poorer ratepayers. To get out of that tangle I suggest three principles.

The first principle is that the proportion of total local government expenditure which is borne by the Exchequer must be increased. That can be done either by transferring wholly to the Exchequer some services that are now shared between the Exchequer and the rates, or by increasing the proportion which the rate support grant bears to total local government expenditure. Which of those ways is chosen—in the end we shall probably choose a mixture of the two—is no great matter. It is a comparatively simple administrative decision to make. What matters is that a bigger proportion of total local government expenditure should come from the Exchequer.

My second principle is a corrective of the first. One does not want so to extend Exchequer help that there is no revenue-raising problem for the local councillors. It is the local councillors' job to decide to what extent they will develop the services that I have described within the limits set by the minimum which the law requires and the maximum which the law will allow. It is for the local councillors to decide within those limits how far and how fast to go. It is for them to determine the form and organisation of the services. It is for them to determine, each in his own locality according to its needs, the priorities between those services.

There should, therefore, be a sizeable chunk of local expenditure left to be met by local levies, and it is the duty and responsibility of local councillors to tell the citizens how much they will charge them and why. If local councillors are not left with that measure of duty and power, the independence of local authorities will be reduced to zero and it will not be worth anyone's while to be a local councillor.

My third principle is concerned with how to make the local levy—the money raised locally by decision of local councils for local services—proportionate to ability to pay. It is notorious that the rating system has got more and more out of gear with ability to pay. I venture to give two examples which put that beyond doubt.

A household which consists solely of husband and wife does not need as large a house as does a household in which there are children. Usually, although not always, such a small household lives in a smaller house and pays lower rates. A household with children may well be in greater need and not so capable of contributing to local services as is the smaller household where there are no children.

Then, let us take two households each consisting of four persons, living in comparable dwellings and paying the same rates. In one household two out of the four may be very young children and the care of them makes it impossible for the wife to go out and earn an income. There is only one income coming into that household. In the other household there may be young people who are earning and there may be three or even four incomes coming into the household. Yet both households will be paying the same rates.

These are but two of many anomalies that one could quote. I believe that the only remedy is the one spelt out by the hon. Member for Bedfordshire, South (Mr. Madel), namely, local income tax. The right hon. Member for Southend, West (Mr. Channon) pointed out some of these anomalies, but could not quite get the words "local income tax" out of his mouth. It was left to his hon. Friend the Member for Bedfordshire, South to spell out the matter plainly.

So far as local income tax would affect domestic ratepayers, let me outline what it would involve. When a taxpayer pays income tax the size of his income is made known to the tax collector. After the requisite allowances and deductions have been made, the taxpayer is told that he must pay the Exchequer so many pence in the pound of taxable income. I suggest that he should also be required to pay so many pence in the pound to his local council. The number of extra pence would be determined by local councillors, and for that they would be responsible to the electorate. The taxpayer would not pay the extra number of pence in addition to the rates he now pays, but would pay them instead of that sum. The result would be that some households would pay more, but they would be households which could reasonably afford to pay more. Other households would pay less than they are paying now, but those would be the ones which are hit by the anomalies in the present rating system.

Mr. John Tomlinson (Meriden)

Does my right hon. Friend agree that what he suggests would be grossly discriminatory against rural areas, such as my own, where the per capita cost of services inevitably is much higher? We should still have a major problem about distribution of resources from central Government to local government.

Mr. Stewart

The point made by my hon. Friend about rural areas will be more properly dealt with when we consider the amount of Government contribution. I am saying that the help from the Government should be greater, and I accept that its distribution needs close consideration. Nevertheless, there should be some element of local levy, otherwise there would be no local independence at all. I suggest that a local levy, whatever it is, would be better raised in the form of a local income tax than by a levy based on the size and appearance of the house in which one lives.

We have been told time and again that a local income tax is administratively impossible. That might have been true years ago, but with modern methods of calculation, recording and correlation of the facts we should be able to get away from the axiom that a local income tax is impossible. I put forward these three principles as a part contribution towards finding a system of local government finance which will be fair as between one citizen and another and, equally important, will enable us to provide services worthy of a civilised society.

5.33 p.m.

Mr. Stephen Ross (Isle of Wight)

I am grateful to you, Mr. Speaker, for having called me so early in the debate. I think I caught Mr. Deputy's Speaker's eye a little too early on a recent occasion, although I was grateful for having been called.

In making a contribution to this debate on the subject of rates, which is certain to be free-ranging, I shall try to be constructive. However, I feel that I must refer—I exclude the right hon. Member for Southend, West (Mr. Channon), who in his speech tried to be constructive—to some comments made by the former Conservative Government. In the run-up to the last General Election, and indeed during the campaign, there was a great deal of manoeuvring by the Conservative Party for its own political advantage.

On the question of rating reform there were 5,000 posters in my constituency calling on people to vote for my Conservative opponent because he aimed at reforming the rating system. A spontaneous uprising by angry ratepayers in many parts of the country occurred in the early part of this summer and, in my view, it was perfectly justified. That was seized upon by the Opposition, desperately trying to placate many of their traditional supporters by making some extravagant claims and promises during the election.

I should like to correct the Secretary of State for the Environment on one point. I understand that the official line taken by the right hon. Member for Finchley (Mrs. Thatcher) was to phase out domestic rating over a five-year period. However, many Conservative candidates, including my opponent, told electors that the Conservative Opposition sought to abolish the entire system. I am unaware of the proposals which the Opposition intend to put in place of the present system. I do not know whether they envisage a form of local income tax. That suggestion has been made by two hon. Members so far in the debate.

It is quite proper for a political party to change its mind, but it would have come with better grace from Conservative Front Bench spokesmen—although at least the spokesman on this occasion, the right hon. Member for Southend, West, admitted faults in the past—to have admitted with proper humility that they had got things wrong in the past and to apologise for not having taken action when they were in office.

The Conservatives published a Green Paper in July 1971 in which many alternative ideas were ventilated and the arguments for and against were clearly stated. It is interesting to comment that the transferring of the full cost of teachers' salaries to the Exchequer, which the Liberal Party has been suggesting for five years, was dismissed on the ground that it would sharply divorce financial from managerial responsibility at local level. It might be argued "will that not still be the case?" It might be said that perhaps 10 per cent. of that charge should remain a local charge. I do not think the Liberal Party would disagree with that view, and indeed I doubt whether any other hon. Member would disagree with it.

The outcome of the situation, however, was a consultation paper issued by the Department of the Environment in June 1973. It contained some interesting conclusions in paragraph 15: … no substitute offering major advantages of a similar kind emerged from the earlier consultations and comments on the Green Paper. For these reasons the Government"— the then Conservative Government— propose that rates should remain the principal source of local revenue. The document stated 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 … which would … involve complex administration and collection. The Layfield Committee in its deliberations has great problems to consider. One of the difficulties is that life has become so complex that the introduction of a new tax and a new method of collection is bound to be unpopular with the public, even though they may be calling for abolition of the present rating system.

All these considerations were examined 18 months ago. Since then the Local Government Act was passed in February 1974. Therefore, it ill behoves the Conservative Party now to make criticisms to which we were subjected almost continuously since the Conservatives woke up at the end of last May.

Everybody is aware of the parlous situation in local government finance. No doubt this is principally due to inflation, but reorganisation has been costly—much greater than the figure of £54 million quoted in today's Daily Express. The advantages of local government reorganization—and there have been advantages—have been lost on the general public. I should like to express a word of sympathy to the officers and councillors who serve on local authorities and have to bear the brunt of a great deal of criticism, much of it ill-informed. Too often I have been obliged to sit in this Chamber listening to Conservative spokesmen unfairly passing the buck for what, after all, is largely their own creation, and it has been passed on to the backs of these unfortunate people. No wonder they are disillusioned—and there is disillusionment in local government service and amongst local councillors. New officers were appointed with high hopes and new councillors were elected with good intentions. They are becoming increasingly frustrated by the chronic lack of finance and the increasing cynicism of ratepayers.

In the months prior to taking over the reins of office they toiled long hours—they could not claim expenses in those days—implementing the Bains Report and the favoured system of corporate management. Appointments were made and salaries were fixed according to a preordained scale from a joint negotiating body. We had a scale fulcrum fixed according to population figures, and we appointed officers above or below the scale of the fulcrum. Now they are being told by the very people who helped to set out these guidelines that in most cases they are over-staffed and over-paid. If we are to regain their loyalty and restore their enthusiasm, I suggest that we must be more circumspect, in the criticisms that we level against them.

Governments are far too prone to introduce legislation which places more and more liabilities on these bodies without providing the finance necessary for them to carry out their duties adequately. Planning control has passed to the districts, but they have not the qualified staff necessary to do the job adequately. Heaven knows how they will cope if the Government's intentions with regard to building land are passed in their present form. Area health authorities suddenly find themselves having to finance a free chiropody service to old-age pensioners without any thought having been given to where they are expected to find the money. We know that countryside officers have to be appointed by local authorities. There are numerous other examples.

Responsibility for the present-day acute problems of local authorities lies here in this House, and we should admit that that is so. How are they supposed to implement the recommendations of the Houghton Committee on teachers' pay, due soon, if the system remains as it is? The Government must make some announcement about this matter now, and I hope to hear some crumbs of comfort by the Minister later tonight. Failure to act on this will completely sink the finances of our luckless education authorities.

We are told that the Layfield Committee is now sitting, albeit only once a fortnight, and that it will report by the end of 1975 or earlier if possible. In the meantime, the present rating system is to remain. I do not think that that is an unreasonable attitude for the Government to take. But if we are to get through the next 12 months without a complete breakdown in local government and a ratepayers' revolt—and there will be one—there are a number of steps that the Government must take, and their intentions should be made clear as soon as possible.

I accept that there is a very important discussion going on at the moment. I believe that there is to be a meeting with county treasurers and other officials at the end of this month. I accept that the Government are not in a position to announce their full intentions today.

Mr. Percy Grieve (Solihull)

I accept what the hon. Gentleman says about the grave danger facing us of a breakdown in local government finance next year and of a wholesale revolt by ratepayers. In that frivolous speech by the Secretary of State, did the hon. Gentleman hear one word of the action which the Government intend to take to obviate such a situation?

Mr. Ross

I am prepared to give the Government the benefit of the doubt, and I hope that my party does the same. I cannot believe that they are not conscious of the feeling among ratepayers. I cannot believe that they will allow the situation to remain as it is. I understand that the Secretary of State saw some 50 deputations during the last Session of Parliament and said that that was enough. He must be aware of the situation.

I wish to make one or two suggestions about what I believe should happen. First, the Government should state their intentions about rate support grant as soon as possible. This must be as generous as can be devised and as equitable as can be contrived. All hon. Members will talk of their own constituencies, so I must have my own word. In my authority the distribution of the needs element last year gave us a very poor deal. The Minister came to see us at the beginning of August. I hope that we got the message over to him. We have a rising school population and a rising old-age population. As the hon. Member for Bedfordshire. South (Mr. Madel) pointed out, such a situation works very much against an authority in the needs element computation. By a mathematical accident, we came off worst of all the counties. By comparison, Berkshire received a 28 per cent. higher grant towards expenditure than that of the Isle of Wight. I hope that the Secretary of State will at least put that one right.

To give an example of the way that inflation has hit us, although we are a small authority, we left £1 million in our balances which we thought would be more than adequate. Instead, by the end of the financial year our deficit is likely to exceed £500,000. So we have gone right from one side to the other.

Second, local authorities should be assured that they will receive a fair increase order to cover inflation in the current financial year, and this should be made known without delay. There is a suspicion that this may not be coming. Seven or eight years ago it was suddenly withdrawn. We hope that an increase order on the present rate support grant will be made, and made known soon.

Third, the Chancellor of the Exchequer should announce his intention of continuing his July concessions to domestic ratepayers into the next financial year and of extending his measures to cover the smaller commercial premises. I agree very much with the hon. Member for Southend, West. Small shopkeepers have suffered badly. Surely it is possible to devise a gross value below which small commercial premises could be included in the rate relief which the Chancellor of the Exchequer gave last Session.

Fourth, the Government should give their blessing and a speedy passage to the Local Revenue Bill, which I trust that the right hon. Member for Crosby (Mr. Graham Page), having won second place in the ballot, will now reintroduce—

Mr. Graham Page

indicated assent.

Mr. Ross

I am glad to see that the right hon. Gentleman agrees with me. I could not understand the opposition to it in the last Session, though I believe that it was their Lordships who finally pulled the string on it. I trust that it will be given a speedy passage. In times of stringency, surely we can still be allowed to improve our cultural and leisure activities. It would give local authorities a source of finance which they could control themselves.

Fifth, guidance should be given to authorities about those areas in which they should work closer together. Just because further reform is unthinkable so soon after the last upheaval, there is no reason why staff and premises should not be shared and proposed new buildings shelved. I still think that there is a great deal to be said for the old all-purpose authority. The first moves towards such amalgamations, where they make sense, could be made now. There are one or two places where it makes sense, and my own constituency is one.

Having heard the figures for Hereford and Worcester, which apparently went up to 45 per cent. last year and 50 per cent. is threatened this year, I am fairly certain that Hereford would rather like to get its identity back again. One way might be the all-purpose authority. We hear about schemes for all-purpose buildings. There is a new county building being erected near Worcester. It so happens that I know that part of the country rather well. Surely these things should be looked at again and the Government's ideas made known on whether they would allow all-purpose authorities in England and Wales, such as the old county boroughs used to be. After all, this sort of thing has been allowed in Scotland. It surely makes sense, where the public would welcome it and the rate would be financed, so to do.

Sixth, I want the Government to give local authorities greater freedom to raise finance from simple forms of local tax. A very simple one on the Isle of Wight would be a landing charge. If people came over and paid their way, we should be delighted.

Of course there will have to be cuts in present local authority services, although it is difficult to know where. Speaking as a former chairman of a policy and resources committee, I know that the last time that we fixed our rates we made substantial cuts. Now, apparently, local authorities will have to do more and the exercise will be even more difficult.

But there should not be cuts in housing expenditure. I welcomed the Secretary of State's conversion in his speech at Brighton the other day to the idea of low-cost housing designs and mobile homes. This is an area in which money could be better spent. The need is certainly immediate. One could consider imposing a double rate on second homes. This has been suggested elsewhere, and it could he introduced now purely as a temporary measure.

Nor, I hope, will there be cuts in social services or further education, particularly evening classes, which have gone to the wall in past times of stringency. Highways and lighting seem obvious targets. I cannot understand why there have not been cuts in lighting already, as there have been in Belgium and France. When one leaves this House at one o'clock in the morning, one sees lights blazing everywhere. Also, some of our ideas on work study seem to have gone badly wrong. There seem to be more people with stopwatches than men at the grass roots doing the job.

I make the final plea that at this late hour the Government should reconsider their proposals on development land. Why not impose a variable tax based on the capital value of land already passed for development—not land which does not already have planning consent or has not been scheduled for building? In any case, the tax should not initially be at the penal rate of 80 per cent. With that kind of rate, no one will do anything. Such a tax might start at 30 per cent.,

rising to 70 per cent. after a year if work had not started and finally to 100 per cent., which I believe the Government have in mind. If such a tax were levied and collected by the planning authority, it would not only bring in much-needed additional finance locally but restore a free market in building land and get some houses built into the bargain.

5.53 p.m.

Mr. James Boyden (Bishop Auckland)

The hon. Member for the Isle of Wight (Mr. Ross) has analysed for me the reasons for the political opportunism of the Conservative Party. I need not elaborate, except to say that I do not think that in the election the Conservative Party quite realised the damage it was doing to local government by throwing out the political bribe of abolishing the rates.

Anyone with the slightest connection with local government knows how unpopular the rates are, and it is the easiest thing in the world to say that they will be abolished. It did not affect my constituents, who are politically quite shrewd. They see through that sort of thing. But one of the aftermaths of the Tories' political bribe is that they have damaged local government and made it difficult to put forward some of the ideas that my right hon. Friend the Member for Fulham (Mr. Stewart) was putting forward about the essential values of local government and the need to support it.

I agree with the hon. Member for the Isle of Wight about the need to support the officers of local government and the councillors in their big efforts to improve the quality of our life. To knock local government, to offer a cheap election bribe about it, is permanently damaging. The Conservatives will have a good deal to do to recover from this.

My local authorities—Durham County Council and the district councils—have suffered badly from the local changes. We reckon that local government reorganisation by the Conservative Party has cost the ratepayers about 20 per cent. I would suggest that in his calculations of immediate relief the Secretary of State should make some allowance for the cost of the Tory reorganisation. In our case, it is 20 per cent. pretty well down the drain. My local authorities ask for this very strongly.

I was sent a telegram for this debate by a council in my area, the Sedgefield District Council, which reads: Council greatly concerned at the prospect of a 40 per cent. rate increase for 1975–76 with reduction in service standards. Request that Minister's attention be drawn to this in debate on rates today. The council is as much concerned with a deterioration in the services as with the costs.

My right hon. Friend the Member for Fulham and several other hon. Members have advocated a local income tax. We certainly need extra sources of local revenue, but there are two great objections to a local income tax levied locally. One is that it is an extravagant administrative proposal. Raising the revenue would mean much more administration when it could be done perfectly well by the central Government at minimal cost. But, much more seriously for an area like Durham, a low income area, more would have to be raised on our rates than in the rich areas of the South and South-East, so it would be socially regressive.

I do not think that rates will go. The British people are surprisingly conservative. They may howl about the rates but they have great difficulty in thinking of alternatives. My plea tonight, therefore, is for additional sources of local government revenue, to make the rates part of the income but to see that the additional sources protect the actual services. I am very concerned that in the present crisis atmosphere and for the reasons that I have given there will be an assault on local government services which will spoil the civilising effects of those services for my constituents. That is just as important as holding down the rates.

I am therefore all in favour of a surcharge on income tax, surtax and corporation tax levied by central Government and passed to the local authorities as a cushion against the strain on the rates that inflation brings with it. This would give them a strong element of money guaranteed for their services and it would be fairly buoyant, because the amount of income tax rises with inflation. It would be a strong source of income to supplement the rates.

I agree with the hon. Member for the Isle of Wight about the importance also of moving teachers' salaries from local government, but it is curious that the Tory Party, which has always claimed to be the strongest about local independence and the independence of the universities and has said that who pays the piper calls the tune, has now concluded that one can get rid of the biggest item of local expenditure without the central Government calling the tune.

But I think that it is worth the cost. I have never thought that the argument about the piper and the tune is quite as strong as the Tory Party says. It would be a big relief, which could be done quickly, and could be done under the shadow of the Houghton Report, to make a considerable difference to local rates.

In Durham about one-quarter of the net revenue expenditure is on teachers' salaries. Under the current rating arrangements transferring that cost to the central Government would save the county of Durham £6½ million and produce much more flexible possibilities for the rates. In addition to the rate support grant and the support from the centre more notice should be taken of the history of an area and its present amount of industrial activity. Durham still has too much unemployment and, of course, it suffers from a legacy of unemployment which will take years to overcome. In making the new computations for the future, I ask the Secretary of State to bear in mind that this should be an important element for consideration.

I also say to the Secretary of State—this is in line with what the Chancellor of the Exchequer is thinking at present—that as the nationalised industries are now to make charges to eliminate national subsidies, the Secretary of State should look at this matter from the point of view of local rates. The nationalised industries do not, on the whole, pay adequate rates as compared with those paid by private industry. One of my district council suffers from this particularly badly because it has a large railway workshop which has had far lower rates levied on it over the years than would have been levied if it had been a private enterprise. While we are clearing up the situation with regard to nationalised industries, I hope that we can apply the principle to the rating situation as well.

Mr. Hugh Rossi (Hornsey)

The hon. Gentleman will be aware that the General Rate Bill which his Government have introduced, which postpones rating revaluation, affects directly the question of valuation of premises occupied by a nationalised industry. If he and those who think like him support his Government in this matter, they will be making things much more difficult for local authorities such as his.

Mr. Boyden

I do not follow the reasoning as to why it will make it more difficult for local authorities, but this has been a long-standing grievance in the district council of Shildon, which is now in the Sedgefield district. I do not think that the employees in the nationalised industries will have any objection to this proposal, and I hope that it will come about.

In seeking new sources of revenue, what is also required is an attempt to find more adequate support for capital expenditure. Again I have a specific problem, as have other hon. Members, in relation to the new towns. Originally, and still, the main financial support for the new towns comes from the central Government, but district councils and county councils have to provide, almost by the force of circumstances, more new and expensive facilities in the new towns than they do in the older areas.

This has been a very difficult local political matter for me over the years. To some extent it has been resolved now because I have the new town in my constituency, so I am responsible for the new town and the older communities. But there should be a very considerable extra clement of support from the centre for district councils and the county council for the provision of services for the new towns. For one thing, if it were done in this way it would help to soften the antagonism which exists in the older communities, who say "Here is a new town getting everything, and we are going to the bottom of the queue for schools and so on."

Here are ways in which the Government should apply their minds immediately to the question of teachers' salaries and, in the long term—for the consideration of the Layfield Committee—a considerable increase for local government revenue from an income tax and surtax surcharge. In addition to that, there should be more capital provision for local authorities for the new towns.

I want to criticise two possible ways of raising revenue which would very much penalise areas of low income tax and low wages and which are not particularly attractive or on the main routes of the tourists.

A local sales tax or an addition to VAT, for example, would be most unsatisfactory in my area. I imagine that the turnover with that sort of thing would be far inferior to that of other places which are much better off anyway. Again, it would add an unnecessary and a particularly heavy administrative cost. A local car tax would have the same effect. We have fewer cars in County Durham than there are in places like London and the South. Many of the remedies which have been suggested for increasing local government revenue would adversely affect areas of low income and relatively low industrial activity.

In conclusion, I hope that when the Secretary of State makes his decision on the rate support figure and the contribution to local government immediately, he will not make the mistake which my constituents consider he made on the last occasion. I see that my right hon. Friend the Member for Jarrow (Mr. Fernyhough) agrees with me. Durham was very upset by what happened. The Durham people are very loyal to their local government. I am sure they will agree with what I have been saying about local government services being important for a good life.

Like everyone else, Durham people do not like paying rates, but they are prepared to pay rates if they think they are fair. That is one of the reasons why they criticised bitterly what the Tories did during the General Election campaign in tossing the abolition of rates into the political arena. It is one of the reasons why I ask that the Secretary of State will take note of Durham's claim when he comes to the rate support grant.

6.6 p.m.

Mr. Kenneth Warren (Hastings)

I should like to concentrate on the question of the attitude of mind of local authorities and the present Government towards people's ability to pay their rates. Most of the debate, apart from the very valuable contribution of my hon. Friend the Member for Southend, West (Mr. Channon), has been more about what we ought to do in the future, after some commission has sat, than about the very pressing problems which face ratepayers now.

I am very concerned, as was the right hon. Member for Fulham (Mr. Stewart), about people's ability to pay their rates, because more and more people are now being caught between the rent and rates relief boundary and their ability to pay. Many people who have saved throughout their lives are far worse off than those who are getting subsidies. In fact, it has become a burden on people to have to declare that they have savings, because they are automatically required to pay rates which they can ill afford.

What I am wondering is why no assessment is being carried out, or is proposed to be carried out, of people's ability to pay their rates. I take an example which concerns a vast area of southern England and the problem of the rate levied by the Southern Water Authority. The fact that many other hon. Members throughout the south of the country have been in correspondence and consultation with that authority identifies one of our problems.

My constituency of Hastings, like every constituency throughout that authority's area, has suffered substantial rises in rates. In the case of Hastings there has been a 60 per cent. price rise—for the same water, coming through the same pipes and from the same sources, and going to the same people. When it comes to looking forward to what the authority proposes to do in the next financial year, however, and the objectives which it has already prepared for discussion we find that it is talking about a vast increase in capital expenditure without any study of what people can afford to pay.

Indeed, when I managed to get the Price Commission to look at the whole of the rate levy being called for by the Southern Water Authority last May, I thought that at last something would happen. But nothing has happened since May. I hope that the Government will be able to give an indication why the Price Commission should take six months to study such a simple and straightforward problem without giving a reply.

Another problem which faces many parts of the country, particularly the South, where there are a lot of retired people, is the question of transport by bus and by rail. Under the Transport Act 1968 local authorities have the right to provide travel concessions on buses, but those concessions are the responsibility of the ratepayer. However, some boroughs are richer than others. Unfortunately many boroughs along the South Coast which have large retired populations are much poorer than others. This is an area which is generally believed to be very prosperous. But the people over the age of 65 in my constituency of Hastings number 21,000. The council can afford only just over £7,000 in subsidies for those people to have reduced bus fares, whereas another council nearby, a much richer council—no one would deny it the chance to pay more money if it can—is able to subsidise travel to the tune of £20,000 but has only half the number of pensioners.

Given the narrow tax base which many local authorities have, it is unfair to penalise them for taking retired people when richer places such as London, which assist their pensioners by making substantial subsidies for transport, are not called upon to make any contribution towards providing services for those who have emigrated from London to the South Coast.

Exactly the same is true in relation to rail transport. The Southern Region of British Railways states: It is not possible to extend concessionary fares without some element of financial support from the local authority. I know how well read you are, Mr. Speaker, and I am sure you have heard of the book "Catch 22". This is precisely a "Catch 22" situation, because we are told that councils are the only body which can pay with money they have not got. We cannot wait too long for action. We have already waited a long time hoping to hear proposals from the Government. All we have been promised is more talk.

That attitude is at the heart of any control of the rates which people are asked to pay. The Association of County Councils, in the brief which it issued for the Second Reading of the General Rate Bill on 7th November, referred to the question of revaluation and expressed worry about the softening of the blow to the ratepayer, because this is of great assistance to local authorities. My hon. and learned Friend the Member for Solihull (Mr. Grieve) referred to a ratepayers' revolt. He is right. People simply cannot afford to pay, yet they are confronted by this attitude on the part of the Association of County Councils.

It is interesting to see how the opinion of one council about the forward budgeting of another is exemplified by the opinion of the East Sussex County Council about the Southern Water Authority. The county council states: They are contemplating a rate of growth in their expenditure far in excess of anything that local authorities may be thinking of. The areas I have just discussed represent a picture which is to be seen right across the country.

The last aspect I wish to concern myself with is that of housing. Hastings just cannot afford to house the 6,700 people who are on the council waiting list, yet there is a Government-backed scheme to bring 15,000 Londoners into the town. We cannot house our own people in our own inns. This is a shocking state of affairs.

There must be changes in the rate support grant and in the system of allocation of funds. We cannot wait for the report of the Layfield Inquiry. The Secretary of State said that he was profoundly conscious of the situation he inherited. I should like to know what he is prepared to do other than simply talk about the problem. We have had no promise of effective action or real help for the ratepayers. Perhaps the right hon. Gentleman has an easier constituency to deal with than I have. Perhaps he has never had to witness the tears of ratepayers who do not know how they are going to pay their rates and who see their savings disappearing and their whole way of life being torn apart. This should be the Secretary of State's concern now, not after the result of some inquiry has been made known. If by April of next year the right hon. Gentleman has not come to the House with help on the scale and of the kind which is required, we shall welcome his resignation.

6.14 p.m.

Mr. E. Fernyhough (Jarrow)

It will never be easy to resolve the problems which the House is discussing. There are two ways of paying for the services which the community demands. They can be paid for either partly through the rates and partly through a Government subvention, as they are now, or they can be paid for completely by the Government.

After all the years during which this problem has been discussed it was not until after the February election that Conservatives put their cards on the table. They had never said, until the right hon. Member for Crosby (Mr. Page) said it after the election, that they would put the cost of all local services on income tax. Immediately after the February election, Tory Members almost without exception pretended that the great demands which ratepayers got in March and April were the consequence of the election of a Socialist Government.

Mr. Michael Morris (Northampton, South)

I remind the right hon. Member that it was the action of the Secretary of State in reducing, without consultation with any local authority, the domestic element of the rate support grant by 5p at a stroke which caused the anger throughout the country.

Mr. Fernyhough

If the hon. Member, who has been in the House for about six months, is so ignorant that he does not know that the rate demands were fixed before the election, he should go back and consult his local authorities, and they will enlighten him. I repeat that every Conservative Member jumped onto the bandwagon.

The hon. Member for Hastings (Mr. Warren) asked whether we on this side had had to face angry people. I faced 1,500 people in the Odeon Cinema near my constituency on a Sunday afternoon. I told them, first, that I did not accept responsibility, because at that time the Labour Government had been in power for only six weeks. We inherited the situation. We did not create it. I said to them "Tell me which of the services you will agree to the council cutting. Do you want the education service cut, the home help service cut, help for the aged cut, help for the handicapped cut, free bus travel cut? If you aggravated, annoyed ratepayers will tell me which of the extravagant services that your council is providing could be cut, I will agree that your rates can be cut."

Every hon. Member knows that when a constituent comes to his surgery seeking assistance he does not say, "I am not taking up your case, because if I do it will mean an increasing demand on the local authority". He says "I will see what I can do about your case". The hon. Member concerned knows full well that if the council yields to his representations it will result in an increase in the rates.

If the Secretary of State for the Environment had yielded to each request made to him during Question Time, even in this short Parliament, the rates would have to go up even higher.

Dr. Keith Hampson (Ripon)

I accept the right hon. Gentleman's last point. Does he accept in return that the Secretary of State's action on taking office of establishing a flat 13p rate thereby produced an increase on average of 10 per cent. to 15 per cent. and in some instances much more? I think that Solihull is a case in point, where it produced a 36 per cent. increase to make the total increase 92 per cent.

Mr. Fernyhough

Any man in the position of my right hon. Friend the Secretary of State who made a decision which automatically forced up the rates of his own constituents must be a very fair-minded and just man, because he knew full well the anger he would have to face. If he was prepared to make a decision which hurt those whom he represents but which gave relief to some of those to whom he is not answerable, I think he is a man to be admired, not a man to be unduly criticised.

In all my public life I have tried to explain to my constituents that I could easily reduce their rates. I have said "Any fool can promise to reduce your rates. All he has to do is turn off the street lighting, close the parks, not sweep the streets, not empty the dustbins and not send the children to school until they are seven and make them leave at 11 years of age." Of course any fool can reduce the rates, but we are living in a very articulate society which is constantly collectively making greater demands.

We can do one of two things. We can tell people bluntly, as I do when I open a community centre or a health centre, "Remember, it has to be paid for". We must tell people that their collective demands have to be paid for, or we are political cowards. I do not pretend that when I addressed my irate constituents it was the quietest meeting that I have ever had, I am not pretending that I left satisfied customers there, but I can say that my majority went up by over 2,000 at the last election. It did not, therefore, have an undue effect politically, although that afternoon it might have been supposed that everybody in my constituency was opposed to me. I spelt it out to them honestly and fairly that if we, as a civilised people, were constantly making ever greater collective demands on the local council, whether in relation to the mentally or physically handicapped, the pensioners or whatever section of society it might be, we must accept that those improved and better services could be made available only through increased rates or taxes.

If tomorrow we were to adopt the suggestion of the right hon. Member for Crosby (Mr. Page) of putting all the rates on to income tax, the small meeting to which I have referred of 1,500 irate ratepayers would be nothing compared with the inevitable meeting of irate taxpayers. They would lobby just as effectively until we made it clear to all of them that they could pay less provided they had less. I am not prepared to tell my constituents that we should make cuts in the rates because I know what the result would be. If a child does not receive the educational facilities that he should have, we can never make them up to him later. If a cripple or a maimed or aged person does not have the necessary services when he needs them, we cannot make them up to him in later years.

I believe, despite the burden which it places on the ratepayers, that in respect of local government services our country is the most civilised in the world. There is no other country which has roads, street lighting and libraries equal to ours and which looks after its sick and maimed as we do. No other country in the world provides water and sewerage systems as we do throughout the entire nation. These are measures of our civilisation. We have to pay for these things, and whether we pay directly or indirectly I do not mind. [Interruption.] All I hope is that the hon. Member for Daventry (Mr. Jones), with his record in land deals, does not plead on behalf of the poor ratepayer. He has made enough money out of land deals with local authorities to relieve many poor ratepayers, so I do not want any interruptions from him.

As you know, Mr. Deputy Speaker, I have been in this House a fairly long time, and when Tory Members get obstreperous I can exercise all the patience in the world, because as long as I am on my feet I shall either have silence or other hon. Members will be delayed in saying their little party pieces.

A lot of humbug has been deliberately created by the Conservatives in particular since they lost power in February. They have tried to transfer the guilt. I am determined that they shall not do it. I shall spell out to my people, as I hope my colleagues will spell out to their constituents, where the blame really lies. I hope that my right hon. Friend will eventually find a solution to this problem which no other man in his position has yet been able to do.

6.25 p.m.

Mr. John MacGregor (Norfolk, South)

Like other speakers this afternoon, I welcome the opportunity to speak in the debate in advance of the announcement of the rate support grant for next year. This subject impinges on Members of Parliament as well as on local authorities, and I only wish that we could have had the debate a little earlier before the Government make up their mind.

I hope that the hon. Member for Jarrow (Mr. Fernyhough) will forgive me if I do not follow him too far in his argument. May I simply say to him that I do not think that this debate is about realism in local authority expenditure or about cutting local authority expenditure. What concerns us, as clearly concerns the Chancellor of the Exchequer, is that some local authority expenditure is getting out of hand and ratepayers are finding it almost impossible to bear the burden.

The Secretary of State made great play of the fact that the Conservative Opposition had undergone a conversion on the Road to Damascus. There are many good precedents for such conversions. Although various studies in previous years have shown the virtues of the rating system as against other systems which we are now exploring, the fact is that in the last two years the increase in rates and in inflation has been such that it has become much more urgent to consider the whole system again.

The Secretary of State also made great play of the slow movement and the delay in rate reform by the previous Conservative administration. But the setting up of an inquiry, as he has done, is a classic method of delay. It means that three years on from 1971 the Secretary of State is still moving slowly. The facts and the arguments about the alternatives are now well known. We may not agree on the alternatives, as has been made clear in this debate. But what is now needed is decision by the Government. The Government could easily spend the next six months sorting out their own mind on the various alternatives and then bring proposals before us so that we can judge upon them. My fear is that with the Layfield inquiry we shall have lengthy debates before the Government make up their mind and that we shall not see rating reform for many years to come. Therefore, the accusation of delay applies just as much to the present Government as to any other.

I welcome this debate also because it is clear from my postbag and from ratepayers' meetings that it is not merely a question of big revolts next year. There will he a growing revolt from now on. There is a real risk of some ratepayers not paying, not least because they see militancy and the exercise of power outside the law paying off elsewhere and they are prepared to adopt the same attitude. I do not support them in that view, but I find that one of the most difficult arguments to meet is that if some have been able through retrospective legislation to get away with it, why should not the ratepayers try as well?

It is understandable that people should take that view, partly because of the steepness of the rise in rates with many ratepayers having to face up to 100 per cent. increases last year and the prospect of increases of 35 per cent. or more, which is a conservative estimate, this coming year. They are concerned too that the Chancellor's measure of relief which was announced in July may not apply next year. It would be helpful if ratepayers could be told now the Government's attitude on the continuance of that relief.

People's attitudes are also understandable because of the unfairness of the incidence to which many hon. Members have referred—not only the unfairness as between two different households with different expenditure requirements and a different income, as the right hon. Member for Fulham (Mr. Stewart) pointed out, but the incidence as between different areas. The rating system is now applying particularly heavily to areas with below average incomes—and there is no reflection of this in the rate support grant formula—and to areas which have a particularly high proportion of elderly folk. I know that the rate rebate system is designed to assist with both of these groups, and it does so to some extent, but I agree with those who drew attention to the area of income just beyond the rate rebate relief and the people there who, with not very much more income, are having to face this higher burden of rates. And at the same time in the rural areas, where the elderly are often to be found, they face additional expenditure month by month over and above that which is experienced in urban areas. In the rural areas people are dependent upon their cars, and very often those people are on below-average incomes. They need to get to work or, if they are retired, simply to get to the shops or the hospital. These people are finding cars more and more expensive to run, and so the rate rebate element in itself is no longer sufficient to protect some of them.

Like other hon. Members, I wish to refer to a local aspect of the problem before moving on to two points on the national scene. In my short time in the House there have been two debates already on the rates and on the rate support grant formula and the way it affects people in rural areas. I do not want to go back over the last year and the change made by the Government when they came to power and removed a large part of the central Government grants paid to rural areas, but certainly that action still rankles. I accept the enormous difficulties of working out a new formula for the rate support grant. I sympathise with the Secretary of State in trying to satisfy all the various requirements of the different areas, and I accept that it is impossible to please everybody. Nevertheless, I should like to press the claims of rural areas which are growing in population and whose needs the formula does not accurately reflect.

Then there is the population growth problem. The last time the formula was applied, population related to the two previous years. In the case of Norfolk County Council, if it had accurately reflected the influx of population which had to be catered for in the current rating year the county would have received an additional £2 million from the Government. It is therefore essential, and I believe that it is possible, for an estimate to be made for the year ahead of what the population will be and to make the population element in the formula reflect the up-to-date situation.

Secondly, there is the sparsity factor. For those areas with growth where the population is scattered evenly throughout the community, the present formula by no means accurately matches up to requirements. The road mileage factor is much fairer, and a return to it would be more satisfactory.

There are other factors in the formula like the education unit and the social services unit which operate against those areas which in the past had limited needs or which operated very strict control over expenditure but which now have growth thrust upon them.

I wish in this context finally to refer to one other apparently tiny administrative point which will have an enormous effect on the amount of funds from the Government to Norfolk County Council for the coming year, and that is the administrative decision on what is known as the locally determined scheme in so far as it affects principal road improvements. At the present time those which are currently in the key sector are grant-aided as to 75 per cent. by the Department of the Environment. I understand that from 1st April next year any scheme costing less than £½ million will be transferred from the key sector to the locally determined scheme sector. That means that, whereas this year the key sector item in Norfolk would have totalled £1.2 million from the Government, next year it will total only about £200,000 because of the switch.

One might have expected the contribution from the Government to reflect this administrative change, but I understand that it is likely that the Department of the Environment will not help in this direction. This means that to carry out the same road improvement programme next year Norfolk County Council will have to find at least an extra £1 million from the rates, or cut the programme. The point is that it is the rural areas which tend to have road improvement schemes costing less than £½ million, and so again it is the rural areas which will suffer. That is a simple example of one apparently desirable administration change which will have a substantial effect upon the ratepayer.

So my first plea to the Secretary of State, therefore, is for the formula to reflect these special factors in rural growth areas, with the emphasis on the word "growth".

On the national scene I accept the need for expenditure restraint, and I have no doubt that there have been many examples of unnecessary expenditure by local government. That, however, is no answer to next year's problem because the schemes and the expenditure are already in the pipeline and many authorities, like my own county council in Norfolk have been exercising responsible restraint anyway; because of the lack of buoyancy in the rating system as against Government expenditure where direct taxation benefits from fiscal drag and indirect expenditure benefits from inflation; and because local control in so many areas is now limited, as for example, with teachers' salaries. That is why we have said that these should be transferred to Government expenditure. After all, teachers' salaries now account for about 25 per cent. of the expenditure of authorities which are also local education authorities.

If the Secretary of State will not accept our plea to transfer teachers' salaries, I urge him, as my second plea, to ensure that there is a much bigger rate support grant to local authorities this year to cope with the very special problems they will face next year.

My third plea concerns two further points that we in Parliament should bear in mind. The Chancellor of the Exchequer referred to the need for local government to restrain its staff expansion plans, and I agree with that. However, we should not forget the enormous number of demands that we here in Parliament, Members and Government alike, make for further expenditure in one way or another and which the Government impose on the local authorities year by year. I have a list here of 30 items at least which the Government have imposed on the county councils in the last 12 months and which entail additional expenditure by the authorities, expenditure which they do not seek and which some of them do not want. There is a very real need for us, each time we make a demand for what appears to be a highly desirable project, to consider whether we are right to impose those extra demands on local authorities.

Local authorities also lack freedom to determine what to charge for a number of services. They are unable to engage in economic costing for services they are compelled to provide. For example, a modest increase in school meal prices could make a significant difference to local authority revenue. I am not saying that the authorities should be given local discretion over that, because such discretion would lead to difficulties where, for example, two authorities run different but parallel systems. I have the example of concessionary bus fares very much in mind. My plea is rather for the Government to understand that it is not necessarily local government's fault that there are increases in staff or that expenditure rises so high as a result of impositions by Westminster.

Finally, I want to reinforce the pleas that have been made for relief for the small shopkeepers and garages upon which the rural communities so much depend. To give but one example, a garage owner came to my surgery recently. He had decided no longer to be an employee but to become self-employed and run his own garage. He costed the scheme carefully when he made the move three years ago. At that time his rates were £180 a year. Now, with rating revaluation and rises in rates, they are £1,540, and he is trembling at the thought of what will happen next year, and wonders how he can continue. This comes on top of all the other extra charges and impositions which the self-employed have had to bear. That is one clear example of the severe impact of rates on the small business man. I therefore urge that consideration should be given to a similar rate rebate relief for small business men, shopkeepers, garages and so on with less than a certain maximum turnover. Many of them risk going out of business because of the impact of increasing rates and other costs in the coming two or three years, and that would represent a most serious loss to our rural communities.

6.39 p.m.

Miss Jo Richardson (Barking)

The problem of rates is very difficult. We shall hear, and have already heard, special pleas from many constituencies. I want to intervene briefly because in the last debate on the rates in June there were no speakers from the London boroughs, largely because most hon. Members felt that the South of England and the London boroughs were, perhaps, in a more fortunate, easier and luckier position than many other areas. That is no longer true. I want to speak about the problem from the point of view of a London borough, because the London boroughs are extremely worried about the situation.

The London borough of Barking, in which my constituency lies, is a good borough. It has excellent services, none of which we want to give up. It has 71 per cent. local authority housing and a most imaginative and excellent scheme for old people's welfare, as well as many community services. We are proud of these things and do not want to give them up. All the ratepayers are proud of them.

We face a terrifying situation, largely because in the past year there have been pay awards, threshold payments, revised London weighting allowances, and increased employers' contributions for superannuation, national insurance and graduated contributions. We could not budget for them. We did not know what they would be. Now we know what they will be. In the London borough of Barking they will cost us £3,800,000.

When the Conservative Party was in power and my borough put forward its last rate estimate the Government said that the increase we were suggesting was too big. They seem to have had their heads in the sand, not realising that their economic policies would create a round of wage and salary increases and eventually the difficulties in which we find ourselves.

For 1974–75 we shall be £2 million in the red, but our rate forecast for 1975–76 —which, by coincidence, is being announced tonight—is that we shall be £12 million in the red, unless we receive interim assistance from my right hon. Friend the Secretary of State for the Environment or the rate for the domestic ratepayer in Barking rises from the present 1.79p per week to 3.63p. That is an increase of more than £2. I hope that we shall receive the interim assistance, because a rate increase of £2 a week in a borough such as mine will defeat many families. My borough is probably not the worst affected.

The increases are all a result of a round of wage claims which arose from the economic difficulties in which the Conservative Government left the country many months ago. Thank goodness they left power then. The possible increases in rate demands will produce an upsurge of applications for rate rebates, particularly in a borough such as mine. Of the rate rebate 90 per cent. is grant-aided, so in the end it is a matter of an Exchequer subsidy. It will be very difficult for the boroughs to collect rates from those not eligible for rate rebates, when the money often does not exist.

We are only one of 32 London boroughs. All the London boroughs have been affected by the revision in London weighting. Other parts of the country are not affected by London weighting as we are. I hope that my right hon. Friend will bear this in mind, and that any increased help to councils to pay their London weighting will go to London boroughs and not simply be put into the general pool.

All of us on this side of the House felt that the London weighting revisions were overdue and well deserved. I am only sorry that the negotiations took so long. Salary increases are inevitably back- dated, and the retrospective awards and long-drawn-out negotiations put councils in difficulties in suddenly having to find money when a pay award is made.

There has been much talk tonight of removing the burden of teachers' salaries from the local authorities to the Exchequer. I should oppose that if it meant, as I believe it probably would, that control over the number of teachers employed by the local authority were exercised by the Government and not the authority. I should prefer as much autonomy as possible in all respects to be left in the hands of local government.

Mr. Nicholas Winterten (Macclesfield)

You do not pay.

Miss Richardson

We all pay as taxpayers or ratepayers, and sometimes both.

Several Conservative Members said that they were sorry my right hon. Friend could not announce very much tonight. We all understand why he cannot do so. He is in the middle of his discussions. We want those discussions to go ahead in their proper way and to produce a positive result. Therefore, we understand why my right hon. Friend cannot say more now.

We also know that alternative forms of rating are being considered. We waited a long time for any proposals to come from the Conservatives when they were in Government. They talked and talked, and displayed no sense of urgency. I am convinced that my right hon. Friend is considering the problem urgently. I hope that he will give some interim help as well as giving us a hint of longer-term proposals for additional sources of income.

6.47 p.m.

Mr. Fred Silvester (Manchester, Withington)

I wish to make one plea, only that the discussion of the question of who pays for local government services is not bedevilled by the matter of local autonomy, the power of decision by the local councillors and council.

The early purpose of the land tax, which we have had for many years, was limited to the locality in which it was raised. Rates were then used to improve the physical environment of the people paying them. There was a direct relationship between coughing up the money and the use of the service. As time has gone on, that relationship has diminished. Even in the old Poor Law days it was possible to transfer someone who was thought to be a burden on one parish back to his original parish, so that only those who had a responsibility by birth had to foot the bill.

Those days are long gone, and we all agree that that is a good thing. We must face new realities, and the new reality here is that local councils have already lost their autonomy. Local government faces problems of overwhelming size. Manchester and other great conurbations have problems of migration and other matters of congestion that are not of their own sole making. That is already recognised both in the way in which we work out the rate support grant and in additional, special measures such as those relating to city centres, and now, for example extra payments to teachers in stress areas. We are already making, in special circumstances, special payments for this or that variation which occurs because of the great problems arising following national or regional difficulties. It is now unrealistic to regard a specific local authority area as being able to determine the problems with which it will be faced, and, therefore, to call upon it to whip up the resources to deal with those problems.

Secondly, we are faced with nationally determined policies. My hon. Friend the Member for Norfolk, South (Mr. MacGregor) listed over 30 duties which have been added this year, and the hon. Member for the Isle of Wight (Mr. Ross) made the same point in a telling fashion. We in this House say what shall be done. More and more we are saying what shall be done. It is not simply that we say "You shall undertake such and such a service". We are frequently determining the composition of that service.

If we examine the education bill, about which we have been talking this evening, it will be seen that the wage rates paid to teachers are nationally negotiated. The hon. Member for Barking (Miss Richardson) spoke about the number of teachers. For many years we have had a quota system in operation. The practical variation open to a local authority is minimal.

Mr. Tomlinson

Would the hon. Gentleman not agree that in this national determination of the education wage bill, as in the national determination of the wage bill—for example, for local authority manual workers—the people who participate in the national negotiations are local authority representatives and not Government representatives?

Mr. Silvester

That is true, but it is also true that two other parties to such negotiations are the Government and the nationally organised unions. I am not making the point that this is a responsibility of which anyone should be ashamed. It is a situation which has grown up. So many of the things which local authorities undertake, both in terms of what they do and the resources they have to do it, are nationally determined.

The question therefore arises: how far do they have freedom to do things in addition? They have some freedom in the way they carry out services within a given sum of money. Even there we are experiencing increasing difficulty. The Secretary of State for Education will, presumably in this Parliament, seek to introduce a national system of comprehensive education. That system would undoubtedly be varied from local authority to local authority if they were given the chance. The authorities will not be given that chance. The only thing they will be given is the ability to decide what will happen with one school in relation to another. The money for carrying out the scheme will be decided by the Minister, as will the policy. It will be the local implementation only, within given sums of money, that will be determined locally.

We are already in a situation where local authorities are severely hamstrung. We are finding ourselves asking people to bear heavy local burdens, which, we have heard, will be difficult to collect, which in many cases are becoming insupportable, to maintain what is increasingly becoming the myth that local government decides what shall happen.

We say that the time has come for a change. We have been accused of making election propaganda. That was a fair thing to say during the election and I did not mind anyone having a go at me then. It is no longer true, however, We are faced with an entirely different ball game. We are now in a situation in which the pressures on the rates are quite other than those with which we have previously dealt. It is right to say that it is time to make a decision on the principle and leave the details till later. Many have said during the debate that it is not right to do that, that we must wait until we decide upon the alternative ways. We have been talking about alternative ways for 40 years. My hon. Friend the Member for Bedfordshire, South (Mr. Madel) went through most of those ways earlier.

Mr. Marks

The Conservative Party changed its policy when higher rates became payable in the countryside. The constituents of the hon. Gentleman and myself, in Manchester, have for some time been paying much higher rates than any which those in the countryside are paying now. Why was action not taken before, when the unfairness existed?

Mr. Silvester

The hon. Gentleman is missing on two points. First, there has always been a problem, to which I was coming, over the distribution of rates fairly between town and country. I have already mentioned that, but the hon. Gentleman was not present for that part of my speech. We had already started taking action on that through the rate support grant, which his right hon. Friend changed, in that there was a switch from country to town. Manchester benefited from that. The hon. Gentleman knows that I did not oppose his right hon. Friend in giving Manchester more rate relief.

Mr. Marks

The hon. Gentleman did not support that move either.

Mr. Silvester

No. The reason was that the proposal we put forward was to cushion the change. By taking the cushion away we left some of our other friends in an exposed position. The hon. Gentleman is right in saying that the cities have had a burden which the countryside has frequently not recognised.

The point I was making at the beginning of my speech, upon which I would hope to have the hon. Gentleman's support, is that this is the result of pressures which have developed arising from regional and national events. The cities have collected the problems together. These problems are becoming progressively more difficult to manage and the pot is beginning to boil.

These things do not happen by accident. They do not happen because Governments suddenly change their mind. They are a response to slowly growing and powerful pressures. This is what Parliament must recognise. We must not over-stress local autonomy in tackling this problem. It is urgent, and in the end the Exchequer will have to bear the costs of local government expenditure.

Government will also, whether we like it or not, have to seek more control of local government expenditure because it is an increasingly important part of the management of the economy. We have seen in the past year that a lack of that control is a major factor in influencing events. I do not have a solution, but there are certain circumstances already in the universities and in the arts in which it is possible for the Government to provide money en bloc, but the management is left for the people concerned to deal with. That method would leave considerable areas of freedom to local councils.

I may be going too far for many of my hon. Friends. There would remain the possibility of discretionary income through lotteries, charges, and such things as can be handled locally. However, the vast bulk of the cost of local government services now has to be provided from money raised centrally and distributed in some way to local authorities. The sooner we grasp that nettle the better.

6.58 p.m.

Mr. Ronald Brown (Hackney, South and Shoreditch)

The hon. Member for Manchester, Withington (Mr. Silvester) would do well to look at history. The block grant system is not new. It has been with us for a long time. Many of us resented it when it was introduced because there are many fallacious arguments contained within its philosophy. I hope that the hon. Member will not go too far in arguing to bring back block grants before he understands them.

One of the odd things about this debate is that it is like the umpteenth showing of a film. This all started in 1963 when the reorganisation of London was taking place. In those days many of us argued against that reorganisation on the fundamental ground that it raised local government cost without adding anything of value. We fought and argued and we forecast the increase in rates that would arise. I forecast that there would be a rise of 10s. in the pound within five years as a result of the reorganisation. The House may be interested to know that somebody did an exercise five years later in 1970 and discovered that, taking out the 1s. 2d. that the Government gave towards local government, I was absolutely right about the cost.

That was what happened in London and now, 10 years later, I suggest that it will happen to the rest of the country. The very idea was absurd. Different Ministers refused to understand that, with the reorganisation of local government in the way that it was carried out, inevitably the cost would be there. When we objected to London being dealt with in that way in 1963, we were told by the then Conservative Government that it was important to get the reorganisation carried out and the cost would look after itself. It did look after itself, and London is now in a parlous state.

I want to address myself to the London situation. First I want to draw attention to what I regard as the unfair allocation of national resources to London. My fear is that the grant settlement for London will again be insufficient for it to carry out its local government services without having to demand from ratepayers larger sums of money than will have to be levied outside London.

The London ratepayer is in a desperate situation. Rateable values in London are high. Therefore departmental advisers, as well as advisers to local government outside London, believe that the ability of ratepayers to pay high rates is thereby enhanced. London's average rates in the pound are somewhat, but not all that much, lower than those levied outside London. Therefore, it is argued that London can afford to pay more.

It is freely admitted that London's expenditure is much higher than expenditure anywhere else. Again, it is argued that this is compensated for by the higher rateable values. Therefore, the question is asked: why should London be given preferential grant treatment? Indeed, some people ask: why should London receive any form of special treatment to cut its rate burden? That reasoning may appear sound to people outside London, but it does not seem so sound to the 7½ million ratepayers in the metropolis whose average cash payment is much higher than that of ratepayers in the rest of the country.

Research shows that the rateable value of a three-bedroom Parker Morris standard house in London averages out at more than half as much again as a similar house in the Merseyside conurbation and the rural areas of Kent. I have some figures which illustrate the position. Taking Dyfed in Wales as 100, in the North, in the Durham area, the rateable value will be 131 for a similar property; in Shropshire, in the West Midlands, it will be 140; in the South-East Kent, it will be 150; in the North-West, Merseyside, it will be 157; and in Greater London it will be 243. That shows immediately the vast difference in rateable values between London and other parts of the country. The excess leaps to two and a half times the rateable value when we compare London with Wales. Yet if the forecasts that we have seen and heard about on television and radio are to be believed, some London boroughs are estimating for 50 per cent. to 100 per cent. rate increases in 1975–76 unless they get extra rate grant aid.

Before murmurs of "Extravagance" are heard, I should point out that these increases are to meet inflation and committed expansion, over which there is no control. Increases of this magnitude are substantially higher than anything mentioned elsewhere and they are to be levied on a rating base already well above the average.

What are the reasons for London's poor rate grant position? First, London's higher costs can be quantified as at least £200 million more than the average for England and Wales. This figure of £200 million is identified and therefore not overstated. Yet London receives a 3 per cent. weighting this year for that amount, which is less per capita than the weighting received by other parts of England. London's weighting for higher costs is approximately £1.25 per head of the population. This compares with £5.99 for the inner South-Eastern counties, £1.04 for the outer South-East and £1.44 for the West Midlands. It seems difficult to reconcile these figures.

Secondly, included in the higher costs that I have just mentioned is the serious item of the London pay award to local government officers, London Transport and the police. This payment acknowledges the higher costs of working in London and does not apply generally to the rest of the country. In 1974 it will add £74 million to London's bill, but because of the operation of the rate support grant formula the vast majority of the grant attracted by this expenditure—approximately 60 per cent.—will go to authorities outside London which do not bear the burden unless some adjustment is made. We in London argue that we do not want a proportion of that £74 million back; we want the whole of it. Otherwise it is an unfair and continuing liability, because ratepayers outside London will benefit from an expenditure that affects only people in London.

Thirdly there is the rate support grant, which is a method designed to transfer grant to local authorities on the basis of a formula which measures need by the use of objective factors. The formula is applied to London, but London's expenditure pattern is specifically excluded from the formula because if it were included London would get much more grant at the expense of other ratepayers in England and Wales.

This thinking stems from an attitude which emphasises rateable resources as a measure of ability to pay and ignores the ultimate cash burden on ratepayers. On present thinking, not much hope can be held out of the problem being corrected in 1975–76 to the relief of London ratepayers. In percentage terms, London's rate support grant is 35 per cent. of the relevant expenditure, whereas for the country as a whole it is 54 per cent.

Fourthly, there is what for years has been considered an internal problem of the London boroughs. I refer to the London rate equalisation scheme, which was devised and created by the London boroughs to transfer part of the wealth of some of the wealthier Inner London boroughs to some of the poorer boroughs in London as a whole. That was purely an internal arrangement that was arrived at by agreement by the London boroughs. It was an arrangement entirely outside the rate support grant system. It may well be adopted in other parts of the country in the years to come. It has been seized on by the Government as an argument that the need for extra assistance is alleviated by the considerable cash adjustments that are made under the London equalisation scheme from richer to poorer authorities. It seems that what we have been able to do in London between the boroughs to arrive at an equitable position is to be unfairly seized by Government and used against us. What can be done to accord fair treatment to London's seven and a half million ratepayers?

There are three possible solutions which should be considered before it is too late. The first is to include the whole of London's expenditure pattern within the formula, suitably amended, to ensure that what is rightly London's is given to London. The second solution is to give to London a high compensatory weighting factor to produce a similar result. The present 3 per cent. is insufficient and derisory. The third solution is to accept the truth—I am afraid that the House still resists accepting it—and recognise that the whole London set-up is different from that in other areas. We cannot treat London local authorities in the same way in any joint formula that has been devised for other parts of the country. That means that London should be taken out of the rate support grant formula and dealt with separately and unilaterally. Only then would justice be seen to be done.

London's local authorities are facing next year massive rate increases. They have only two choices before them and both are unpalatable. They can introduce a straightforward cash demand upon the ratepayers, which will lead to militancy and ensure that the ratepayers face an enormous and unacceptable burden, or they can cut the essential services. That would involve people in need being dealt with harshly as well as a loss of personnel. I believe that there is no other choice. Only an additional cash injection can alleviate the situation.

I hope the Government will understand that the London situation is serious. It has been argued year in and year out. We are now coming to the end of the road. I urge all my right hon. and hon. Friends to understand that we need help badly. I hope that we shall get it tonight.

7.14 p.m.

Mr. Peter Fry (Wellingborough)

I hope that the hon. Member for Hackney, South and Shoreditch (Mr. Brown) will pardon me if I do not take up his remarks too closely. I must point out to him that I represent part of a county whose problems are being exaggerated by London. One of the major difficulties is that Northamptonshire is being asked to take on board many of London's problems without the financial wherewithal to pay for the services that we are asked to provide. We were not encouraged a few weeks ago when a Mr. Sherman, who I believe is a colleague of the hon. Gentleman's, stated that Northamptonshire should take a higher percentage of the real problem cases in London. I can assure the hon. Gentleman and Mr. Sherman that Northamptonshire ratepayers take a dim view of that idea.

One of the main features of this debate has been the remarkable paucity of suggestions that have come from the Government Front Bench and from their back benchers. It is significant that Labour hon. Members who are always so free with advice when in Opposition, have had little to offer this afternoon. I feel that it will be no good to them or to the country just to spend their time recriminating on what has happened in the past.

I shall change slightly the tenor of the debate by discussing a subject that is not a popular matter with everyone—namely, the effect of the current state of local government finance on road construction. I realise that roads are not popular with everyone. Roads and the traffic which uses them rapidly become identified in many people's minds as one of the evils of our time. I am aware that we cannot discuss the trunk road programme, but in our towns and rural areas there are many main roads which are the responsibility of the local authorities and play an essential part in our road transport network.

I shall give the House an idea of the extent of the problem. The present transport supplementary grant of 70 per cent. is less than the old 75 per cent. grant which was allowed for principal routes. It is felt that the present basis of grant is unsatisfactory, especially as it takes no account of the counties which are expanding at an above-average rate. If we are to have the projected programme for Northamptonshire for 1975–76 the possible bill for construction and land at November 1973 prices will be no less than £11,080,000. The comparable figure for Essex, for example, is less than £7 million, and the Leicestershire figure is less than £3 million.

It is disturbing to me and to many people in Northamptonshire that almost the whole of the expenditure is required for four development areas. Over the next 10 years, it is reckoned, about £50 million will be required in Northampton and Wellingborough and for routes in between. Out of the £11 million only £600,000 will be available for other road schemes in the county. That means that the attractive town of Oundle will have to wait longer and longer for its bypass. In villages where the people cannot sleep at night because of heavy lorries trundling by their front doors and bedroom windows there is no idea when relief will be given.

I suggest that the present system of transport grant is totally inadequate. That is not the only problem, because out of the grant has to be paid not only road construction and maintenance expenditure but public transport subsidies. For example, in Northamptonshire we find that the subsidies increasingly have to go not to where the services are few and far between in the rural areas but to the urban and semi-urban areas. It seems that the bus services are losing most money in those areas, and presumably that is where there are most votes. Many of my constituents who live on the edge of the county are finding that the services that they enjoy are becoming fewer but there is a regrettable tendency for their rates to become higher. They feel strongly that they are getting a poor bargain. It seems that the ratepayers in the non-expanding areas are expected to subsidise development although it is difficult to find many people even in the development areas who are enthusiastic about the expansion. That basic inequality in the transport subsidy grant should be put right.

I am aware that there are people in our community who feel that we should not bother about new or improved roads.

They are usually the people who complain bitterly about through traffic shaking their ancient buildings and endangering life in our village streets. Yet it seems that even this Government realise that the ideal is for the lorry, especially on through roads, to be separated from people. The proposed diversion of heavy traffic which is envisaged in the "lorry route" scheme will only make life intolerable for some residents near those roads for as long as it takes to put the improvements in hand. The longer the delay the longer the misery that will ensue.

Mr. Peter Snape (West Bromwich, East)

Does the hon. Gentleman think that a far better use of public expenditure would be to persuade people who wish heavy freight to be transported from one end of the country to the other to use the public facilities provided rather than to use heavy vehicles which must pass somebody's window whether or not we build new roads?

Mr. Fry

I proposed to refer to that matter later. I remind the hon. Gentleman that 85 per cent. of all freight carried in this country goes by road and only 9 per cent. by rail. If the amount carried by rail were enormously increased, the natural increase in the amount of goods to be carried would still mean that something would have to be done to allow for the heavy lorries. However, I am sure that the hon. Gentleman would agree that on any journey of less than 100 miles the lorry is a much more efficient and economical form of transport, and the average lorry journey is only about 30 miles in length.

The Freight Transport Association has said that the idea of lorry routes should be deferred as regards the completion date because it cannot see how the routes will be ready and satisfactory by the projected time. Other people say that we shall not have any vehicles soon because the energy crisis and the cost of petrol will reduce the amount of traffic. But the National Economic Development Office said: The figures suggest a dramatic rise in the price of petrol leads to a short-term drop in demand but this is fairly quickly absorbed and the rising trend resumed. This is borne out by the Central Policy Review Staff, which said: They (the public) would prefer the flexibility which travelling independently permits even in the face of large rises in the price of petrol, despite the fact that travel by train or by bus consumes less energy ". I agree with that, except the last words. Unless a bus or train is pretty well full, it is often less wasteful of energy for people to use small cars. This is one of the interesting facts which those who are against the idea of more money being spent on roads do not always admit.

Those who say that there will not be more cars on the roads plainly have not read the forecasts recently put forward, particularly by the Society of Motor Manufacturers and Traders. It is estimated that by the year 2000 we shall have no less than 40 per cent. more vehicles on our roads. I wish to impress on the House my conviction that no foreseeable possible shift to any other form of transport is liable to avert a large increase in road traffic.

I mentioned in reply to an intervention a few moments ago the amount of goods which are carried by road. It is worth restating that, even with a large increase in the amount of goods carried by rail, extra expenditure on road construction and better roads would still be needed. Better roads are needed not simply to annoy a section of the environmental lobby but because they reduce congestion, minimise gradients, lead to lower accident frequency and allow continuous steady speeds, all of which improve fuel economy and, in the long run, save energy.

I appreciate that the pressures on the Exchequer and on Government spending programmes are very great. I believe that my county council is making allowance for a rate of inflation of no less than 19 per cent. in the current year and 25 per cent. for next year. It would, however, be wrong to imagine that everyone accepts even the present level of rates. For too many people, particularly in areas such as mine, the level is too high already. Therefore, anyone who talks about expenditure in a certain direction, as I have done, should make some suggestions about where some of the necessary finance may be obtained.

I have advocated before in the House, and I do so again, the launching of road bonds on the open market with a Government guarantee. That will enable money to be forthcoming to build the motorways and pay for the trunk roads on a basis similar to that which some of our EEC partners employ and similar to the idea about raising capital for the Channel Tunnel. That would reduce the strain on the Treasury, and other resources would be made available to improve and build roads which are the responsibility of the local authorities.

Secondly, if the Government had supported Conservative amendments in legislation for legalising paid lifts in private cars and the delicensing of many bus routes, much more effective help could be given to rural areas where public transport is virtually non-existent. That would mean that less money would be needed for expensive bus subsidies.

Thirdly—I am surprised that no one has mentioned this—the Working Party on School Transport which reported towards the end of 1973 suggested that all parents should pay a flat rate for all children who wanted transport to and from school. I assume that there would be the normal exemptions for handicapped people and those on low incomes. As the cost of school transport is part of the education bill, it is surprising that neither the Conservative Government nor the present Government have considered bringing this into effect.

I endorse the comment of my hon. Friend the Member for Manchester, Withington (Mr. Silvester) that the bulk of the money which is needed by local government should be provided by the centre. With a provision of 60 per cent. and perhaps more in future, it should not be too difficult to devise a scheme whereby the Government give 90 of 95 per cent. The arguments about local autonomy no longer stand up in the face of the irate feeling of ratepayers.

I turn to the question of the problems of my constituency. There is an abnormal rate of expansion in my county, and the bill for it is not being fairly shared. The small shopkeeper who does not live in one of the new areas is having to pay more so that bigger and better shopping centres can be created to take his trade from him. The villager whose home is not even on main drainage although his rates continue to increase will have to wait longer for the bypass to take traffic from his front door.

Therefore, the problem is one not simply of changing the present system of financing road construction and improvement but of recognising that many counties, particularly Northamptonshire, are carrying more than their fair share of the national burden. Unless something is done very soon, the frustration of ratepayers will boil over. When the Minister for Planning and Local Government visited my county, he calmly told us that the rates would be assisted from the profits of land nationalisation. The comment of local ratepayers was that if people believed that they would believe anything. It was no good putting forward a pie-in-the-sky idea like that when the Bill for land nationalisation or municipalisation has not even been presented.

Unless something is done for the ratepayers of Northamptonshire, and indeed for the rest of the ratepayers, a very serious situation is likely to ensue. Millions of people who would not normally dream of disobeying the law have watched what happened at Clay Cross and the Labour Party's attitude to it. They have learned the lesson of a very bad precedent. The situation is so serious that the Government could well be responsible for the greatest degree of mass civil disobedience ever witnessed in my lifetime. It is no good the Secretary of State or any other right hon. or hon. Member opposite talking about what the Conservative Government did or did not do. Now they are in power. The responsibility is theirs, and they will be judged on what they do.

7.30 p.m.

Mr. Kenneth Marks (Manchester, Gorton)

The hon. Member for Wellingborough (Mr. Fry) said that certain things were the Government's responsibility, but his final remarks were completely irresponsible. My right hon. Friend the Secretary of State said that it was not a good time to have a debate on the rates, six days before his statutory meeting with the local authorities, but I do not altogether agree with him.

This House does not sufficiently often debate rates before the rate support grant orders are put forward. Six days may be a rather short period, but I hope that it will be sufficient time for further thoughts on the matter by the Government. Once the rate support grant order is published and we debate it, there is not much that Parliament can do. Only once in my experience has a part of the House voted against a rate support grant order. That was in March when the Leader of the Opposition led his troops into the Lobby against the rate support grant order. Fortunately for the local authorities and for the country as a whole, 80 of the right hon. Gentleman's colleagues failed to follow him.

There is not enough parliamentary participation in discussion on the rate support grant before the order comes before us. One of the reasons for this is that we do not have adequate information. The previous Minister of State promised during debates on the Local Government Bill that he would publish the proposals that he made to the local authorities and he said that he would not object if the local authority associations published their proposals. He carried out that promise to a limited extent, and I hope that the present Government will in future ensure that we are told of the basis of the argument between the local authorities and the Government regarding the rate support grant.

We ought to participate in the decision on this. It has already been pointed out that we give local authorities all the jobs to do and, therefore, we should have a much more important say in how the rate support grant is to be shared out.

For a number of years I have advocated in the House the abolition of the rating system. I realise that there are disadvantages in all the other alternatives but it has always seemed to me, even long before this year's hiatus, that the disadvantages associated with the present rating system were greater than its advantages.

I accept that the Government have done the right thing in setting up a committee of inquiry—a high-powered committee—to examine the alternatives. I accept that the task will probably take a long time, but I hope that there will be some result before the end of next year. A number of us have served on Select Committees examining various problems. We have had all the facilities of the House, we have been able to call witnesses and we have had all the necessary information available, yet some of our Select Committees have taken a long time to tackle jobs that were smaller than that now facing the committee of inquiry on rates. Therefore, I appreciate that it will take the committee a long time, but I hope that it comes up with a proposal that will end the present rating system.

I think I have spoken in all seven debates on rate support grant orders that have taken place since I came to the House. It was always easy to speak in those debates. It seemed that nobody wanted to take part. I never had any difficulty in taking part. I did not have to say nice things to Mr. Speaker or write letters to him. I merely sat in my place and I was called. Throughout that period, however, people in our big cities were paying high rates. For instance, two years ago people in the city of Manchester were paying a domestic rate of 55p in the pound, which is more than many ratepayers are paying now even after the big recent increases.

In the past I have campaigned on behalf of the big cities. I agree with the hon. Member for Manchester, Withington (Mr. Silvester) who said that the Conservative Government started to do something about altering the grant system and then messed it up by having a varied domestic subsidy. I was glad when my right hon. Friend the Secretary of State made a general 13p domestic subsidy in March.

I wish to draw the Government's attention to the plight of certain authorities—not, for once, those in the big cities—that have had special difficulties in local government reorganisation. These authorities have had problems that are not covered by the rate support grant formula. I agree that it is difficult to find a formula to cover such problems. The metropolitan districts that I have in mind have had the disadvantage of not being based on former county boroughs. The three authorities I am concerned with are Trafford, Knowsley and Tameside. They have had considerable administrative and financial difficulties through not having been based on big towns. The present needs element does not cater for their problems. I urge the Government, even in the short time available, to try to remedy this situation in this year's rate support grant order as well as in next year's order.

Tameside, part of which is in my constituency, consists of nine former authorities—urban districts and non-county boroughs—none of which had more than 50,000 population and none of which had been an education authority or even a social services authority. Those former authorities had only limited planning powers. Some were library authorities but others were not. They did not deal with such things as registration of births, marriages and deaths or with the administration of justice. The administrative costs in setting up new departments following the reorganisation were considerably higher than average. The cost of setting up headquarters for the education service alone was 60 per cent. higher than average. In the case of Trafford the cost was even higher. The costs would probably have been even higher had the services been really adequate. There have been a number of faults in relation to the service.

Setting up departments for all the other new functions to be undertaken was also expensive. Senior administrative staff had to be appointed at a much earlier stage than in other authorities and extra costs were involved in standardising methods of accountancy because the existing computer set-up was inadequate to deal with the new work. Much of the extra expenditure arose in 1973–74. It was higher than the statutory provision made by the Conservative Government and, therefore, became an additional charge on the rates this year.

Many of the staff were previously housed at county headquarters at Preston and Chester, and they had to be housed in Tameside. So new accommodation had to be found, and there were added difficulties because new departments had to be housed in various parts of the new borough. The housing department was in one former district, the planning department in another, finance and administration in another and education in yet another. This did not make for easy communication either between departments or between the public and departments. Information offices had to be set up in each of the nine former districts.

With regard to capital expenditure there was an urgent need for more build- ing, particularly in the education and welfare services. Because of the past policy of the Lancashire and Cheshire councils there is a woeful shortage, particularly in accommodation for the handicapped. Tameside, with 300,000 people, has only one special school. It is a good school but it is hopelessly inadequate to serve the purpose.

Only today I received a letter from magistrates complaining about the problem of accommodation for juvenile offenders. I will not go into the details but there is a serious problem because frequently a young person who is remanded cannot be found a place and has to be sent home or to an adult remand centre.

No provision was made in the rate support grant order for 1974–75, or in the rate support grant regulations, for the special disadvantages I have been talking about. Tameside, for instance, has suffered considerable financial loss because the basis laid down for grant for personal social services and education units was based on crude population figures and not on true needs. I have inquired into this and received the reply that the matter had been worked out according to the rate support grant regulations and that nothing could be done to change it. I hope that the Government will think again about the regulations as well as the grants.

Another factor is the raising of the school leaving age. All three local authorities had an above-average increase in school population. Previously not so many children had stayed on until they were 16. The figures used for calculating the 1974–75 grant were the school population figures for 1973–74, or probably the year before if I know anything about education statistics. I hope that the Minister will make clear what school population figures he will use for this year's increase order and the main order for next year.

I conclude by asking again that in the matter of rates and local government finance we should have more open government. Parliament gives the jobs to local authorities, and I hope that we shall not simply be regarded as a rubber stamp in the matter of finance for local authorities.

7.40 p.m.

Mr. Michael Morris (Northampton, South)

After a summer of debates on rates one might have thought that there was little to debate in advance of the Secretary of State's meeting at the end of this month. The fact that we are having such a full debate today shows the interest that there is in this subject.

The Opposition know, as, I suspect, the Secretary of State knows in his heart, that eventually there is only one answer, and that is the total abolition of the rating system. However one looks at it the dilemma is that local government expenditure is becoming increasingly out of hand and is costing the country more than it can afford. We also know—and I suspect, with some reluctance, the Secretary of State knows—that something must be done for the coming year.

Those of us who have noted with interest the debate that has been going on in the Press and in the Local Government Chronicle know that the amount contained in the interim order coming up for review is likely to be substantial. Many of us, and most local authorities, feel that the Government should make a generous gesture and, rather than move forward on the basis of 60.5 per cent., should meet at least 90 per cent. and, if they are feeling generous, the whole amount of the interim order. Local authorities are under enormous pressure. Hon. Members on both sides of the House have mentioned genuine cases where the rate support grant is failing miserably to help the authorities which are under the greatest pressure.

The problems of Northampton are very real. If one is to believe the Local Government Chronicle, the prospects are bleak, and I appeal to the right hon. Member for Deptford (Mr. Silkin), when he replies, to leave open in the remaining seven days the prospect of meeting the whole of this interim demand from the local authorities.

The political antennae of most hon. Members would suggest that if nothing is done the increase in rates next year will be between 40 and 50 per cent. The Chancellor of the Exchequer has said that the real increase in expenditure should be restricted to 2¾ per cent. The Secretary of State, knowing that local authorities are forecasting this high rate of inflation and that the Houghton pay award is still to come, will be unable to face the country unless he does something to bring rate increases down to about 20 per cent. That suggests a rate support grant order of just under 70 per cent.—67, 68 or 69 per cent. I am only guessing at this stage.

Having announced that, I suppose that the Secretary of State will sit back in the hope that at last we shall get back to the happy situation when debates on rate support grant orders are of no interest to most hon. Members. If he hopes for that, he is misjudging the situation in the country. I believe that those days are gone.

There are one or two suggestions I should like to make to the Secretary of State. He should check the rate support grant formula. Is the Department of the Environment's multiple regression analysis working, or is it not? The evidence is that it is not working. If it cannot be made to work better it should be thrown out and something else put in its place.

For Northamptonshire, which has had the greatest expansion in the United Kingdom and is one of the most expanding areas in Europe, the rate support formula is not working. We have had tea and sympathy from the Minister but we have had no extra cash. A legitimate demand was put to the development corporation for just under £1 million last May, but the local authority is still awaiting that money from the Treasury. That situation is unacceptable.

Secondly, I suggest that the Secretary of State should be questioning the level of local authority expenditure and, perhaps, questioning whether local authorities are concentrating the money on the areas of greatest need. He should be questioning whether 2¾ per cent. real growth is not too much, particularly when official forecasts suggest that our annual growth rate will be from 0 to 2 per cent. The hard-pressed counties see district councils in their same area spending money on things which by no yardstick are a priority. To give an example, when Northamptonshire faces enormous problems in the staffing of schools, can it be right for the Northampton District Council to build a municipal golf course?

Thirdly, it is surely right that the House should look at what it is doing. We have pushed through a whole host of Bills which place heavy demands on local authorities. Were we to do a survey we should not find one local authority in the country implementing to the full every piece of legislation we have pushed through. I am sure that many authorities would rather be without some of that legislation. I suggest to the Government that we should look at that legislation to see whether the need for it is still there or whether local authorities can be released from these demands.

I hope that the Government will look closely at the help they give to local shopkeepers and small businesses. Many business men face enormous rate increases. Perhaps this aspect mattered a little less when trade was booming, but when businesses are going on short time, as the shoe manufacturers are at the moment, people begin to question whether the Government are sincere in their belief that they wish to help. Now is the time for the Government to take action.

Is this not also the time to query the folklore that the public are asking for more and better services? My experience is that there is no demand among the ratepayers of Northampton for increased services. That applies to members of the Labour Party and also to members of the Conservative Party.

Mr. Marks

To what degree is the hon. Gentleman's local authority implementing the provisions of the Chronically Sick and Disabled Persons Act?

Mr. Morris

We have made a start in that direction, but no doubt there is still work to be done. Surely it is better to spend money on that matter than on a municipal golf course, and it was a Labour council which chose that form of expenditure.

Mr. Marks

We would never have guessed.

Mr. Morris

If we knew that the Secretary of State for the Environment was working hard on these areas of concern, then we would be very much behind him, but we know that angry ratepayers were bought off to the tune of £150 million. We have no guarantee that a similar sum will be forthcoming in the next financial year. Indeed, if such a sum is provided it will do no more than buy time. It may be unfortunate, but it is a fact that ratepayers' views are coloured by the 13p fiddle that took place last March.

I think that the Government took the view that the appointment of the Layfield Committee would help enormously to take this problem out of the political arena, but that has not been manifest from today's debate. Indeed, the situation has been made a great deal worse by the appearance of two Bills in the present Session. I refer first to the General Rate Bill, which seeks to postpone revaluation —and incredibly, after last summer's activities, it was done without any consultation with the local authority associations. Action of that sort in this day and age is amazing. The situation is further worsened by the Housing Rents and Subsidies Bill as a result of which, we understand from the Secretary of State, ratepayers will be likely to subsidies rents as soon as that measure is passed.

If the Government are serious about the Layfield Committee, that committee should now be suggesting to the Government that further research is needed into this or that area. To date there has been a stony silence from the committee.

Mr. Gwilym Roberts (Cannock)

The Tory Party did not even set up a committee.

Mr. Morris

I understand that the committee meets once a fortnight, which is a nice leisurely way to proceed, but is no way to tackle the rating problem.

Visiting Northamptonshire the right hon. Member for Deptford (Mr. Silkin) learned how angry people are at the situation. They are looking to the Government to take a real initiative over rating. They want Government to give guidance to local authorities, and the local authorities are waiting for that guidance. Where is it? Local authorities want to know how to control expenditure and where to cut. It would be nice to see a circular issued after the meeting which is to be held within a week or so, but, above all, the local authorities look to Government to take a grip on controlling local authority expenditure.

The easiest way out of the situation is to abolish rates altogether and to make a firm start by transferring teachers' salaries. I recently heard the Secretary of State for Education and Science at Question Time make clear that no local authority will have to make any cuts whatever in teaching staff. If the Government were to transfer teachers' salaries it would at least get the Government off the hook.

In political life it does no harm once in a while to admit that the other side is right. Now is the time for the Government and for the Secretary of State for the Environment to say that their policies are wrong and that they should adopt our proposals.

7.57 p.m.

Mr. Peter Snape (West Bromwich, East)

I hope that the hon. Member for Northampton, South (Mr. Morris) will forgive me if I do not take up the points of detail which he raised. Perhaps it will be sufficient if I say that I thought his contribution smug, self-satisfied and almost totally irrelevant to the debate.

I know from experience that one area which has suffered in rate terms during the last year is the West Midlands. I appreciate that every hon. Member will have a constituency point to make in this regard, but I should like to tell the House that on 25th March in respect of the domestic rate support grant the Secretary of State for the Environment said that there were specific problems in the West Midlands generally relating to the needs element, and he promised to review the situation before the announcement of next year's grants which is expected within the next fortnight. I hope that the right hon. Gentleman the Minister for Planning and Local Government will remind the Secretary of State of this pledge. We in the West Midlands feel that the rate of increase which we have suffered in the past year has been far greater than has been imposed in most other parts of the country.

We have heard a great deal in this debate about the effect of increases on ratepayers. We have heard little about the cause of those increases. When I made my maiden speech on 25th March on the topic of rates, I followed the traditions of the House and tried to deal with the subject in a non-controversial way. That was a little difficult, to say the least, and the more I hear Conservative Mem- bers commenting on this subject my desire to try to be non-controversial becomes more and more weak as time goes on.

It is a fact, unpalatable though it may be, that the Conservatives by implementing the disastrous local government reorganisation have imposed by far the largest factor in the rate burden. [Interruption.] Perhaps the hon. Member for Ripon (Dr. Hampson) will note that the industrial rate in my constituency in the current year rose by 98 per cent. The hon. Member for Northampton, South spoke of his concern and that of the Conservative Party for small businesses. Perhaps the hon. Gentleman and his Friends will say at the door of which political party we should lay the blame for a 98 per cent. increase in industrial rates in my constituency.

Dr. Hampson

I appreciate the hon. Gentleman's giving me this opportunity to spell out a few points. First, it is not due to the reorganisation of local government. Inflation has much more to do with it, especially in Labour-controlled authorities which have built up tremendous debt charges and have to service the debt. What is more, it is clear that, although the variable system which the Conservative Government introduced was not perfect, and although it involved big increases in some areas, at least it was set up to meet specific difficulties which the reorganisation brought about, especially the changes in the water system. By getting that variable rate—

Mr. Deputy Speaker (Mr. George Thomas)

Order. Is this an intervention?

Dr. Hampson

Perhaps I might just finish what I was saying. The hon. Member for West Bromwich, East (Mr. Snape) asked me to explain—

Mr. Deputy Speaker

Order. I have just been given a long list of hon. Members who are anxious to speak. It includes the name of the hon. Member for Ripon (Dr. Hampson). Mr. Snape.

Mr. Snape

I listened with interest to the complicated explanation offered by the hon. Member for Ripon. I understand that he used to write speeches for the Leader of the Opposition. If today's example is the best that he can do, it may be that that is a reason for the right hon. Gentleman's lack of popularity.

I move on to some other points about local government reorganisation. [Interruption.] The hon. Member for Northampton, South can have a go, too, if he likes. I am willing to give him a verbal box round the ears any time.

Mr. Michael Morris

I think it is fair to say that any Labour-controlled council is bound to have a higher rate than a Conservative-controlled one.

Mr. Snape

The short answer to that is that a Conservative-controlled area is bound to have a lower rate because it is prepared to spend virtually nothing on the essential services that people need.

I return to the vexed question of local government reorganisation and my point that it is the chief factor behind the tremendous increases that ratepayers have had to suffer. The hon. Member for Hastings (Mr. Warren) told the House about the problems that he is having with his local water authority. We are having the same problems in the West Midlands. The Severn-Trent Regional Water Authority, another child of the Conservative Government, has managed to put up the water rate for my constituents by 64 per cent. in the current year. Even for a body as incompetent as that one appears to be, that is some going.

As for the county precept, West Bromwich was formerly a county borough, a single all-purpose authority. As recently as 1966, a local government commission held up the county borough as the finest example of local government in the country. In the eyes of the Conservative Party, the drawback of county boroughs was that the majority of them were much too intelligent to elect Conservative councils, with the result that they were replaced by the nonsensical two-tier system of local government. The services have been transferred to the new West Midlands metropolitan authority and now cost us 105 per cent. more than the same services did in the previous 12 months.

If any more proof is needed, I refer to the Nottingham Evening Post, which has done a detailed breakdown of the cost of local government reorganisation in Nottinghamshire and the city of Nottingham. The statistics which it has produced have not been challenged by the local authorities. It is not difficult to understand why. They are unchallengeable.

It is fair to describe the work of the Nottingham Evening Post as a fine example d campaigning journalism. I wish that other newspapers up and down the country had done the same. I am sorry that the Nottingham Evening Post has not sent a copy of its research to every Conservative Member so that the Opposition might see the damage that they have wrought on local government and the additional expenditure in which they have involved every ratepayer in the country.

The Nottingham Evening Post gives some extremely interesting statistics. In the Broxtowe area the percentage increase in posts is 51.5. Salaries have increased by 68.2 per cent. In Newark posts are up by 37.7 per cent. Salaries have increased by 54.6 per cent. In Bassetlaw posts have increased by 28.5 per cent. and salaries by 44.9 per cent. In Rushcliffe the respective percentages are 38.4 and 39.4. So it goes, right through the county.

Local government reorganisation has been described as NALGO's bonanza. That is slightly unfair. Many NALGO members might be described as the "poor bloody infantry" who stand at the door of the town hall and who staff the housing department. They have not done well out of reorganisation. They find themselves administering far wider areas than before with virtually no salary increases. It is at the top of the pyramid that people have done very well out of reorganisation. Chief officers and their deputies have done extremely well. In Nottingham alone, five deputy directors in one department were non-existent previously. What a prime example of Conservative efficiency in action in local government reorganization !

That is not all. Not only have the new authorities proved completely incompetent to carry out the functions for which they were designed. Rather than admit their incompetence and rather than their chief officers and deputies admitting that they are vastly overpaid, they have taken to employing a completely new innovation, the PR man. The last refuge of the gin-sodden PR man is local government.

This week's UK Press Gazette contains a number of interesting advertisements. Cumbria County Council seeks a publications officer at a salary of £3,939 plus. The Inner London Education Authority wants a Press officer and is offering a salary of £5,927. The city of Liverpool housing department has an advertisement. I had better exclude the city of Liverpool from any adverse comment because I can understand that city, from what I hear of the problems under Liberal control, wanting to employ public relations officers. It is advertising for a chief assistant, publicity and Press relations, and offering a salary of £3,939, and for a senior assistant, publicity and Press relations, at a salary of £2,880. Any avenue will be found rather than admit that local government, as at present constituted since reorganisation, is little short of a disaster.

Opposition Members may smirk, but the ratepayers know that the Conservative Party was the cause of the disasters and traumas which local government has had to go through, with the result that in the past six months or so we have seen the formation of the ratepayers' answer to the Primrose League.

It is strange how organisations of this kind are always formed during the period of office of a Labour Government. We never hear of ratepayers' action groups under Tory Governments. Immediately we have a Labour Government, all the redundant Tories decide that they have to do something to stir things up a bit, they form a ratepayers' action group, and off they go.

Most of my hon. Friends in the West Midlands have had representations made to them about rate increases in their areas. I cannot help reflecting that my right hon. Friend's decision about the domestic rate support grant added a further 6p in the pound in my constituency in March of this year. I was virtually pilloried by the ratepayers' action group in my area, and I had to concede that I voted in favour of the increase because I felt that it was right for the inner city areas. Then, according to my director of finance, my right hon. Friend the Chancellor of the Exchequer gave us back 9½p in the pound in relief in July. In other words, in the past three months we have made a profit of 3½p in the pound out of the Government. Remarkably enough, the ratepayers' action group—a non-political organisation, of course—has not yet got around to writing to me to ask me to thank my right hon. Friend for his action.

For the future, it is all very well for Conservative Members to demand either the abolition of the rates or a reduction in the services provided. It is not their kids who are educated in crumbling Victorian schools. It is not their families and their dependants who have to rely on social service provision, as many of my constituents have to do. Theirs is the typical rural Tory cry of selfishness which should be ignored by the Department. It should be ignored, and I hope that my right hon. Friend will ignore it. It is not the job of a Labour Government to carry out the fiscal policies of the apologists in the Tory Party. I hope that my right hon. Friend will treat their calls for reductions in local authority services with the contempt that they deserve.

Several Hon. Members

rose—

Mr. Deputy Speaker

Order. I remind the House that there are 50 minutes left for back-bench speakers and that at least nine hon. Members wish to catch my eye. Hon. Members can help.

8.11 p.m.

Mr. Michael Marshall (Arundel)

I hope that the hon. Member for West Bromwich, East (Mr. Snape) will forgive me if I do not follow his speech closely —for two reasons. First, I felt that he was introducing a note of controversy to offset his maiden speech, and I do not feel that it fitted this topic. Second, I felt that he addressed himself to the reorganisation of local government rather than to the question of rates. I assume that it was only post-prandial goodwill on your part, Mr. Deputy Speaker, that allowed us to hear those interesting remarks.

It is important to take a united view in this matter. I have listened to, I think, 13 of the 16 speeches in the debate and was heartened to find a good deal of accord at least on the basic premise, that rating reform is long over due. If we start from that premise, I should like to explore how far we can bring that reform about and how far hon. Members can contribute to it.

I am in some ways distressed that the matter is now so obviously being put into low gear. It is clear that, with the setting up of the Layfield Committee and the revaluation delay that we heard about earlier this month, we are in effect reconciling ourselves to being totally unable to reach any major reforms till towards the end of this decade. In that situation, while I regret it, one must be realistic. I should like to suggest some ways in which I hope that the Government will seek to bring short-term reliefs that, consistent with certain principles, in themselves would hold water in the longer-term improvements on which, I hope, we will all agree.

I believe that there are three simple principles which should govern the decisions of the Government at this time. I say this in the context of the influence that the Government undoubtedly can, do and should bring to bear on local government expenditure.

First, the old principle of pay-as-you-go still seems worth advocating, especially in view of the appalling load of capital debt which local government now faces—about £20,000 million, and £1,000 million per annum in interest. Those figures represent one of the most frightening aspects of the present financial state of local government. In the short term the Government should discourage that kind of topping up of the loan element. They can do so by the influence that they bring to bear both on guaranteeing foreign loans and on controlling loans advanced directly to local authorities themselves. At present rates of interest, after all, every ratepayer has to find £60 a year to cover interest charges alone on outstanding debts of local government.

Second, the burden should be shared more fairly, as several hon. Members have said. As to the means, they are open to argument and debate. I support my hon. Friend the Member for Southend, West (Mr. Channon) in putting forward reasonable proposals for immediately transferring teachers' salaries to the national Exchequer. That would provide immediate relief, and in the longer term I still believe that a major shift to the central Exchequer is inevitable and should be recognised as such.

There are short-term considerations, too. I should like to add my voice to that of my hon. Friend the Member for Hastings (Mr. Warren) in reminding the Minister about the overdue commitment to give relief to those who are not connected to main drainage. We were promised in the last Parliament that this matter would be resolved, and it is high time that we heard about this.

The third of my simple principles is that the Government, in their dealings with local government, should once more urge upon them the need to cut their coat according to their cloth. I know that it is easy for us to say that local government is often left to carry out projects when we hold the purse strings, but from both sides of the House there is clear evidence of prestige projects which do not accord with the difficult and almost desperate economic times in which we live.

I have touched on three central principles which I hope that the Government will follow both for immediate relief and for longer-term improvements to the system, but I cannot conclude without a brief word about water charges. It is evident from the budget proposals of the water authorities that the ratepayers will again face substantial increases—for example, 60 per cent. in the case of my own authority, the Southern Water Authority.

Such increases bring into question the relationship of those authorities with the central Government—

Mr. Tomlinson

We told the Tories that in 1973.

Mr. Marshall

I understand the hon. Gentleman's point. I accept that the Government of the day did not have the benefit of my advice.

I hope that I can carry the hon. Gentleman with me when I say that, if we are looking to the way ahead, it is more fruitful to concentrate on positive steps which we may be able to persuade the Government to carry through. Water authorities must make the same critical examination of their capital expenditure as we are expecting of local authorities.

In the longer term we should consider whether water authorities should not be treated more in terms of a national undertaking working with the type of approach which is currently advocated for nationalised undertakings, that of working within a small surplus target.

In the immediate term, we have to wait for the Layfield Committee. There is no way to evade that, but today we have heard a number of important and valuable contributions. The hon. Member for Manchester, Gorton (Mr. Marks) made a particularly helpful contribution, reflecting some of the concern which has been long established in the House on this matter.

If we think about the way in which the matter should be resolved I must return to my original theme. I am always a little worried when one Front Bench suggests that it understands why the other Front Bench cannot do something. Even in a short time in the House I have learned the truth of the old saying that when the Front Benches agree the back benches should beware. The delay into which we are locking ourselves means that the back benchers are perhaps the best guardians we have in trying to effect some short-term relief.

I have tried to be non-controversial. I think it is fair to say that the only really controversial speech came early in the debate from the Liberal bench. I do not want to take that too seriously, but I deplore the fact that the hon. Member for the Isle of Wight (Mr. Ross), who is no longer with us—I regret the way in which Liberal spokesmen tend to make speeches and then leave—injected the first controversial note into what has generally been a constructive debate. I was reconciled by the thought that his strictures upon the Conservative Party perhaps had something to do with the size of his majority.

Finally, I want to say something rather critical of the Secretary of State. In making these comments I would say that we have looked to the Secretary of State to be helpful in these matters and that, in the main, in many matters affecting his Department, he has shown willingness to react positively to the points of view of back benchers, but in this debate he fell far below the needs of the country. His attempt to play knockabout comedy with the matter did not fit the needs of this whole subject of rating reform. In a sense, he would probably be wise to remember, with his joke about a 100 per cent. increase in rates and so on, that in this matter we do not want to continue with a situation of levity.

I do not want to belabour the point. The Minister for Planning and Local Government will have the opportunity of redressing the balance tonight and showing to all hon. Members, on both sides of the House, that the Government's heart is in the right place. If it is not, I join with all those who warn that there is a ratepayers' revolution just around the corner.

8.22 p.m.

Mr. John Tomlinson (Meriden)

I want to pursue at the outset the point made by the hon. Member for Southend, West (Mr. Channon)—who I hope is not about to disappear from the Chamber. It is a point that was reinforced by the hon. Member for Northampton, South (Mr. Morris). Both hon. Gentlemen spent time criticising the delay which will be inevitable in the report of the findings of the Layfield Committee. It is at this point that we ought to make it quite clear that the reason why there will be a delay in getting any recommendations from any committee looking at alternatives to the rating system is that Conservative Members, when in government, did nothing about it. What we had from them on occasion after occasion was a promise about local government financial reform but the attainment of nothing.

The Queen's Speech in 1972 said: Legislation will be laid before you to reform certain aspects of local government finance in England and Wales. What happened? Nothing. The Queen's Speech in 1973 said: Legislation will be introduced to reform certain aspects of local government finance. What happened? Nothing.

The consultation paper "Local Government Finance in England and Wales" said: The Government will introduce the legislation in time for its provisions generally, and where necessary subordinate legislation, to be in operation from 1st April 1974. 1st April 1974 came and went. The only thing that accompanied that date was chaos, caused by the incompetence of the previous administration in making any orderly review of local government finance before they reorganised the basis of local government. As I said in the debate on 25th March, it was an act of almost criminal irresponsibility to reorganise the basis of local government without making adequate provision for the reorganisation of its financial base.

What have we heard in the debate so far? A number of hon. Members have put forward the rather omnibus panacea of "put the cost of teachers' salaries on the central Exchequer and hope that that solves everyone's problems". But if we do a little more sophisticated analysis of the exact consequences of that action, we begin to find that not only does it not solve problems but it creates others.

For example, the total cost of teachers' salaries at present is about £1,400 million, some 39 per cent. of which is borne directly by local education authorities. If we abolished that, we would abolish the 39 per cent. part of it—about £546 million. But that £546 million would not all accrue to the credit of the domestic ratepayer. It would benefit the domestic ratepayer only to the value of about £250 million. We ought to be asking Opposition Members to be a little more forthcoming not only when their proposition would benefit the domestic ratepayer by a mere £250 million—which is a very small sum in the total scale of the problem—but also when, by the back door, they would be producing an additional cash flow to industry to the tune of about £300 million because they would be writing off the industrial and commercial ratepayer as well.

Mr. Rossi

Does not the hon. Gentleman agree that that relief would also go to the small shopkeepers and business men throughout the country who are possibly suffering more than anyone else and who must recoup their increased costs in what they charge the domestic ratepayer for what he buys from them?

Mr. Tomlinson

In his Budget speech my right hon. Friend the Chancellor made certain statements about what will happen. As a Government we have already taken steps to improve the position of industry to the tune of £1,600 million. To add to that a further £300 million, which we would be adding by taking away teachers' salaries from the rates, would have a greater beneficial effect on industrial and commercial ratepayers than on domestic ratepayers. My right hon. Friend's priorities for public expenditure are those with which many of us—certainly many of my right hon. and hon. Friends—would concur as being right priorities with the limited resources available.

Opposition Members have been going through their increasingly frequent bouts of crocodile tears about the ratepayers, but this time without some of the outrageous hypocrisy they went through on the last two or three occasions. They are all moderates now because they have no policy. They have found that the policy with which they tried to bribe the electorate during the General Election campaign did not work. They are not going through all the outrageous accusations, but they hope that we shall be reasonable.

In the present circumstances we must make it abundantly clear where the responsibility rests for the financial crisis in local government. It rests fairly and squarely on right hon. and hon. Members on the Opposition side who were totally profligate in their conduct of matters during the period for which they were responsible.

On 25th March, shortly after my right hon. Friend the Secretary of State took over responsibility for these matters, the rate support grant order was passed by 292 votes to 217, a fairly substantial majority for a minority Labour Government. One begins to ask hon. Members who have suddenly become concerned, where was their concern? It was a concern that arose only when they saw the backwoods pressure from their particular constituencies.

For example, the right hon. and learned Member for Hexham (Mr. Rippon) seems to have disappeared entirely from the scene although he used to be a prominent leading actor in the scenario of these debates. He has a major responsibility on his shoulders for creating a false and irresponsible impression when he allowed the country to believe that he would be presiding over a rate increase averaging 3 per cent. with a maximum of 9 per cent.

On 22nd January 1974, less than a year ago, in circumstances which were directly relevant to the rate support grant earlier this year, the right hon. and learned Gentleman said: I am able to say that the average domestic increase over the country as a whole should be about 3 per cent. The maximum of 9 per cent. is to be, as far as one can achieve it, a maximum, but the variations below the 9 per cent. will be very considerable and should result in a reduction in the domestic rate in many areas."— [OFFICIAL REPORT, 22nd January 1974; Vol. 867, c. 1471–72.] We are still waiting for what was promised in that outrageously irresponsible speech to come to pass.

Mr. Michael Marshall

The hon. Gentleman seems to work himself up into a state of great indignation. His hon. Friend the Member for Manchester, Gorton (Mr. Marks) has already pointed out that until the February election it was easy enough to make a speech in the House in a debate on the rate support grant. If there was all this feeling of ill under a Conservative Government, why were not the hon. Gentleman and his hon. Friends on their feet more often pointing to the ill which, according to him, we should have foreseen but which they did not foresee?

Mr. Tomlinson

Because the House had the benefit of my views, as it had the benefit of the hon. Gentleman's views, only after the General Election in February.

That being the circumstance, we had that deliberately outrageous and irresponsible impression created. It was an expectation that was deliberately fostered by the right hon. and learned Member for Hexham, who seems to have a habit of doing this sort of thing and then running away from the problem. We on this side remember his similar irresponsibility in relation to sugar, but I will let that pass for the moment. The right hon. and learned Gentleman creates the expectation and then runs away from it and seeks to blame somebody else for the consequences of his own creation.

The real causes of rate increases this year have been adequately—indeed eloquently—explained by my hon. Friend the Member for West Bromwich, East (Mr. Snape). Not only should those causes be clearly on the record. One or two other matters should also be mentioned.

For example, in my own area—the Warwickshire county area—there was the totally irresponsible running down of county balances. This practice was multi- plied in many areas where local authorities, seeing the consequences of local government reorganisation, recognising that their local empire would change somewhat and being reluctant to see part of their balances go elsewhere, irresponsibly exhausted their county balances on schemes which in a normal state of affairs would not have been accorded any priority.

In 1972–73 Warwickshire County Council had balances approaching £2 million. It used those balances in an entirely irresponsible way so that in the year in which major rate increases occurred there were no balances available to mitigate and to cushion the effect of the major increases.

Tory Members have a great vested interest in playing down the effect of the reorganisation of local government. If they will not accept the point from my hon. Friend the Member for West Bromwich, East, let them accept it from the Economist, which on 23rd March this year stated: Local government reorganisation was bound to be costly, but three factors have caused costs to soar out of hand. Inflated salaries have been paid to management"— it will be noted that the inflated salaries did not go to staff— by some new councils. There has been a scramble by disappearing authorities to launch expensive schemes that they could not have afforded had they remained independent. There is therefore ample evidence to show that the untimely and ill-thoughtout reorganisation of local government, which was not accompanied by measures to reorganise the basis of financing local government, is largely responsible for this situation.

I turn briefly to the problem of the growth in local government expenditure. Unlike some of my hon. Friends, I do not believe that the growth can continue unabated in local government without its being constrained by the general economic situation. From 1960 to 1974 local government expenditure grew from £2,000 million to £6,500 million. Over that same period the staff increased by almost 1 million. The town hall has always been a powerful and entrenched bureaucracy, and as a result of local government reorganisation it has become more powerful, more entrenched and more bureaucratic.

I was pleased when my right hon. Friend the Secretary of State confirmed in reply to a supplementary question from me that he did not accept that local government could expect its ever-increasing programmes to be cushioned entirely by central Government. There have to be essential priorities in local government expenditure. They will continue, but local government cannot expect to have an expanding programme without constraint in economic circumstances in which the Government themselves are under constraints in their social programmes in other areas.

It cannot be said that there will have to be constraints upon central Government but that somehow local government can be immune from constraints. We would all like there to be economic circumstances in which there could be an expansion in local government spending and in central Government spending, but exemption cannot be granted just because it is an institution called local government.

I urge caution on the part of those of my hon. Friend who wish for an ever-expanding programme of local government expenditure at a time and in a year when we have already more than doubled the borrowing requirement. I do not think we can expect to have an expanding programme of local government expenditure if the cost is to be merely transferred to the public borrowing requirement. In the stringent economic circumstances we face, there must be an acceptance by those in local government that part of the responsibility—we hope as small as possible a part—must be borne by them as it has to be borne by everyone else in the community.

I turn finally to the alternative which was presented both during the election campaign and in this debate by right hon. and hon. Members opposite. They have told us ad nauseam that they would abolish the domestic rate within the period of a five-year Parliament and that somehow during that period they would work out what they would do about it. For example, the hon. Member for Hornsey (Mr. Rossi) recently wrote an article in the Local Government Chronicle as follows: Before selecting any of the available altertives we feel it only right to await the report of the current inquiry into the rating system. He is prepared to await the report of that inquiry before determining what rating system to have, and yet he is prepared to commit himself to the abolition of the existing system.

I regard it as an act of total irresponsibility to cast overboard the system of local government finance, inadequate and inequitable though it may be but a system which has served this country for many years—and to do so presumably honourably in an election campaign, because I would not suggest that there was any motive of bribery. For anyone on the Opposition benches, however, to commit himself to such a course of action seems to me to be the kind of irresponsibility which will condemn the hon. Member for Hornsey and his hon. Friends for many years to come.

8.36 p.m.

Dr. Keith Hampson (Ripon)

I appreciate the opportunity of speaking in this important debate. Whatever the Secretary of State may say, it is timely to have it now before he begins his negotiations. For the same reason that we need to make sure that he is realistic about the situation, many local authorities, including the Bradford local authority which issued a statement yesterday, also feel concerned about whether he truly appreciates the situation.

A couple of years ago the hon. Member for Birmingham, Small Heath (Mr. Howell), when leading for the then Opposition, condemned ruthlessly the proposed 27 per cent. increase. He called it wholesale chaos. He forecast thousands of teachers and policemen being kicked out of their jobs. Most ratepayers may see an increase far beyond that percentage, and it will happen in the next year unless the right hon. Gentleman and his Government do something about the rate support grant. That is the key, the only thing which will affect the situation next year.

I hope that the ratepayers are made aware of what has been said from the benches opposite in this debate. Of the last few speakers not one has mentioned the rate support grant. Not one of them asked the Government to make any adjustments to the formula—

Mr. Ronald Brown

The hon. Gentleman is being unfair. I addressed myself particularly to that point.

Dr. Hampson

I said "the last few speakers." The hon. Gentleman spoke some time ago. He has not been in the Chamber for some time.

The hon. Member for Meriden (Mr. Tomlinson) should be a little more accurate. I accept that local authorities ran down their balances, particularly before reorganisation. It was Labour-controlled authorities which did that with a vengeance, in order to pass on their debts and charges to the new authorities. To blame reorganisation for the increase in the rates is crazy. We have heard from the Government that in the last three years local authority expenditure has been running at twice the level in real terms at which the Chancellor of the Exchequer now wishes it to run. I recall that in the last three years my own party did not do as well as it ought to have done in the local government elections. In the last three years, therefore, this massive expenditure has been coming from the Labour-controlled authorities, particularly the city ones.

When one talks about reorganisation boosting staff, I accept that in many instances local authorities were extravagent. But who were they? It is a shame that the hon. Member for West Bromwich, East (Mr. Snape) has left the Chamber. He cited authority after authority, including Nottingham, and not one was a Conservative authority. Nottingham is not a Conservative authority. West Yorkshire, which prompted my right hon. Friend the Member for Crosby (Mr. Page) to institute an inquiry into excessive staffing, is not a Conservative authority.

What nonsense and what distortion are we getting in this debate. The key to it is partly the borrowing factor and, obviously, inflation. We have seen from the Chancellor's statement that he is as concerned about levels of local government expenditure as we are. The proportion of total public expenditure represented by local government spending has steadily risen and it is now about 30 per cent. The Chancellor knows that to get on top of inflation he must control that spending. When my right hon. Friends were in Government they urged local authorities to control their expenditure, but most of the authorities, particularly the Labour-controlled ones, refused to follow that advice. Clearly, the Government must now get down to restraining their own people in local government.

It is unjust for Labour Members to accuse Conservatives of wanting to cut social services, education and so on. Of course, we would rather not do so, but even to maintain existing levels of services would require at least a 30 per cent. rise in the rates this coming year. The North Yorkshire authority has been building up a debt like most authorities, but it has not wanted to put in for a supplementary demand. It estimates that it will be in the red by £10 million. It will cost another 4p to meet the charges on that debt and a further 8p to cover that rate of inflation, hence the 30 per cent. increase. Bradford has also announced that just to cover inflation it will require a 30 per cent. increase without any expansion of services.

There are obviously difficulties in expecting local authorities to make major cuts next year because they are involved in all the rolling programmes described by hon. Members. That is why the key to the problem is an adjustment of the rate support grant. The authorities face many inescapable costs. For example, there are an increase in school places and an increase in school meals to be met. In Bradford there has been an increase of 4,800 school meals these last six months. In that city it costs £200 on the rates for each new house built. An authority does not have to be very big before that amounts to £1 million or more. Those are the inevitable costs which must be added to other costs like threshold payments, wage demands and the rest.

We are, therefore, in an acutely embarrassing situation with the authorities for next year. The same sort of swingeing increase in the rates will have to come unless the Government do something about the rate support grant. There is no point in the jack-in-the-box performance we have seen from the Secretary of State since he has been in office being repeated. If we are going to do something specifically for householders that must be done now in the negotiations, not four months later when it will cause havoc, chaos and extra administration costs for the authorities which have had to go through all the adjustments again, not by computer but by hand. What about all the other expensive costs, not just the public relations men and the rest, but the nitty gritty of the local authority wage bills—the men, for example, who run the rebate scheme? Higher rates mean more rebates, which means more administration which means more officers to administer it.

Other legislation that the Government are planning to put before the House in the not-too-distant future—particularly their land legislation—will cause an astronomical rise in staffing costs for local authorities. The authorities will have to take on more valuation officers and all the other people who will be involved in these land deals. Can we therefore get the situation into perspective when we try to pin down costs? I am not so much worried about attributing blame, more with getting something done for the domestic ratepayer, the small shopkeeper and the other categories who will be hard hit in the coming year. The Government simply must do something with the rate support grant.

One particular extra cost will arise. The Houghton Report is due to come out in two stages, one before Christmas, and any award to be backdated to April. How will that cost be met? Will there be a special subvention from the Treasury, or will it be a debt on local authorities to be covered on next year's rate? What happens to the second phase next year? Will it fall generally on the local authorities, or will something be earmarked by the Treasury? That is what I should like to see. If this is now covered as part of the educational element of the rate support grant, there is no guarantee that money contributed for teachers' salaries in that grant will go to provide teachers, and that we shall not see, as in Leeds—another Labour authority—school places remaining unfilled.

My next point concerns the water and sewerage charges. The Government have, we hear thankfully, given a commitment that there will be relief for those not connected to mains sewers. How will that be paid for? The administrative costs of trying to find those who are not connected to the mains sewers are already high. Will the cost of the relief be put on the other ratepayers?

The local authorities are still suffering from the adjustments, first down and then up, that the right hon. Gentleman has made in the past few months. They are still working out their rebates. If there are to be the same swingeing increases next year we shall have all the frustrations of citizens refusing to pay their rates. There will probably be rates strikes. Serious cash flow problems could be caused to local authorities, as well as backlogs and administrative chaos.

We must ensure that the negotiations go through smoothly and that local authorities get what they want. Even with a 70 per cent. grant there will probably be 20 per cent. increases in rates.

When the hon. Member for Birmingham, Small Heath was spokesman for the then Opposition he always seemed to have a phobia about revaluation. He always wanted to postpone it. Now the Government are trying to postpone it again. The local authorities have made their disquiet well known to the Secretary of State. Postponement exaggerates the weaknesses in the rating system, which cannot carry the burdens of inflation.

Because of that and increasing costs we shall once more soon have a rate of £1 and more per £. That will cause tremendous psychological damage and great fury. We shall find local authorities being squeezed and services being cut. As a proportion of personal income, rates will go well beyond what they have always been kept at. There will be more and more disenchantment with the whole system of local government, and an erosion of confidence in it, confidence which is already shaky. We shall see social upheaval and political dislocation far greater than we have ever seen in this country.

8.48 p.m.

Miss Joan Maynard (Sheffield, Brightside)

The outlook for local government is bleak. The Sheffield Metropolitan District looks like exceeding its £60 million budget by £3 million. The likely increase in teachers' salaries resulting from the Houghton Report might well add a further £8 million.

I want to consider where the blame lies for the financial difficulties faced by local government. The most expensive form of reorganisation we could have had, coupled with a lack of reorganisation of local government finance, is the main cause of the serious financial difficulties. It is true that we can add the effect of inflation. Local government is labour-intensive, and, therefore, it has probably suffered more from the threshold agreements than some other organisations have. There was a 21½ per cent. increase in prices, when the Government grant assumed a 9 per cent. increase. That is a dramatic difference, which has badly affected local government. If we add to these things the high level of interest rates, the fact that in Sheffield the loan debt is £260 million and that there is an active annual capital programme of about £30 million, we have some idea of the difficulties faced by progressive cities.

Next year's expenditure will rise by over 50 per cent.—and that is on a standstill budget. Local authorities are faced with either making cuts in services, which would inevitably mean in education and the social services, or introducing a steep increase in rates. Whatever we finally decide to do about rates, something must be done to help local authorities. There has been a good deal of talk about essential expenditure and just what that is.

I have been a member of local authorities for many years. In my opinion, expenditure on housing and education is essential. There is a desperate need to provide more houses and new schools. I do not wish to see either of these services cut. Many have asked where the money will come from. It could come from a cut in the defence programme. That is where I would find it. I know that the Government say that there are difficulties in finding extra money, but I say that local authorities must have substantial extra grants to help them over this difficult period.

8.52 p.m.

Mr. Andrew Welsh (South Angus)

I notice that until now I have been the only Scots Member present in the Chamber. So far there has been no Scottish contribution. I find that sad. I say to all English hon. Members that they can fall asleep for the next 10 minutes or so. However, I hope that right hon. Members will remain awake long enough to pass on the good news to the appropriate people.

The present rating system faces us with a basic dilemma. We have the problem of matching up two opposing ideals. On the one hand we demand great quality and diversity from our local government services, and in the main they have matched up to that challenge well. We ask a great deal of our local authorities, yet at the same time we also look for low rates. Few topics can raise more grumbles than that of rate demands. What is required is the matching up of efficiency and value for money from rates paid to local authorities.

This problem is made more difficult by the present rating system whereby the burden of payment tends to fall on one person in each household. The present system will come in for increasing criticism in the coming months as rate increases begin to bite.

The system is open to accusations of unfairness because the burden falls on the householders while there may be several others in the same house receiving the benefit of services without contributing toward them. A similar complaint applies to those who live in small burghs but gain the benefit of the services supplied by larger towns.

The system is open to accusations of unfairness because also of the present inflation, which has caused rapid rises in prices, and because of England's current economic difficulties. I say "England" advisedly. I suggest that hon. Members acquaint themselves with the latest report from the Scottish Council (Development and Industry) before they disagree with me too rapidly on this.

The system is open to accusations of unfairness as a result of the effects of the disastrous regionalisation that has taken place. The new districts and regions in Scotland will be costly. As a district councillor I could see the beginnings of this process. The English example shows that some Scottish ratepayers may soon face rate increases of 100 to 150 per cent. These will especially affect the small burghs which have now been absorbed into nearby large towns. Ratepayers will inevitably face large and unprecedented increases.

I ask the Government to learn from the English example and to ease the shock of this giant increase in rates for the Scottish ratepayers over the next few years. The Government should earnestly consider phasing in these increases in Scotland by means of a transitional rating system. Instead of one gigantic jump in the rates bill, these increases could be phased over the next few years. Given the low level of Scottish wages, such a transitional period could greatly ease the inevitable strain of those rates increases. The revaluation due in 1978 need not necessarily be a hindrance to phasing the increases beyond the three-year period. I hope that this request will receive a favourable response from the Government and that the English mistakes will not be repeated in Scotland.

There is no easy answer to this problem, but something must be done to ease the rates burden. A large part of that burden is brought about simply because of massive spending on crucial items such as housing and education. For example, Glasgow has a gigantic housing problem with an estimated 80,000 to 90,000 houses below tolerable standards. In trying to solve that problem Glasgow faces an enormous annual bill for interest charges—over £21 million in 1972–73—and over and above that there is a net capital debt of more than £280 million. In any event, as Cullingworth pointed out, Glasgow simply cannot solve its housing problem because it does not have the resources to do so. Only the Government have the required funds. Thus, Glasgow ratepayers face an impossible task.

There is a good case for investigating the possibility of transferring these burdens from the rates on to the central Government, but with the major proviso that I am talking about the Scottish context. In lieu of self-government this could be one of the prime functions of a Scottish Assembly. I make the big assumption that such an organisation will come into being. I hope that the House will forgive my scepticism over this matter. Given adequate financial power a Scottish Assembly could play an important rôle in helping to solve the Scottish housing problem and in easing the rates situation.

If anyone is unwilling to see large sums of money used for this purpose I should like to see sums similar to those spent by central Government on wiping out the debts of nationalised industries and London Transport used to tackle Scotland's housing problem.

I am wary of mentioning Scotland's oil since Scottish hon. Members—it is a pity there is none here—seem embarrassed, for some reason or other, whenever that subject is mentioned. However, a portion of that vast asset could be used to get to the financial roots of Scotland's education and housing problems. That would help to ease the heavy burden of rates debt.

I hope that the Government will investigate and research closely proposals such as municipal banks, which could help local authorities in many ways. I should also like to see a detailed Government investigation into local income tax ideas.

I repeat, there is no easy answer to this situation. Rates are a real problem about which we shall hear more in Scotland as the vast increases hit the relatively small numbers of ratepayers. It is a problem of balancing the needs of finance with those of equity. It demands a twentieth century solution to what is very much a twentieth century problem. I hope that the Government will look favourable upon my request for transitional rating as a first, short-term attempt to ease this problem.

8.59 p.m.

Mr. Wyn Roberts (Conway)

The hon. Member for South Angus (Mr. Welsh) confined himself largely to the problems of Scotland. I make no apology for addressing myself to the problems of Wales.

I am concerned about the current rate support grant negotiations for the Welsh counties, all of which, with the exception of Gwent, have a higher proportion of low-income families than the national average. That, of course, is the reason for the differential in the domestic rate support grant. We have had the benefit of the differential of 33p in the pound as opposed to the English 13p. We are grateful for that and we are desperately anxious that it should continue. My county of Gwynedd heads the list of those authorities with a higher proportion of low-income families than the national average. It is followed by other Welsh counties—Dyfed, Powys and Clwyd. The only comparable English counties are Devon and Cornwall.

An assurance was given by the Secretary of State on 27th June. He said that we should take full account of the level of wages and other incomes in an area, which I am determined to do for next year's grant."—[OFFICIAL REPORT, 27th June 1974; Vol. 875, c. 1769.] The Minister's resolution is to be commended. He will not find it easy to take the full account he has promised if he relies on the rate support grant needs formulae which have been under discussion of late. I believe that he must have a special fund to deal with the counties I have mentioned. Obviously the needs of the low-income counties are considerable and they are not reflected in their actual expenditure, which is the basis of the needs formula. Unless the Minister is prepared to have such a fund the rate precept in the low-income counties will be enormous. I am certain that the commercial ratepayers will not have the ability to pay.

Gwynedd's precept for the current year was among the highest in England and Wales at 47.5p. It was fifth from the top. Dyfed and Powys were in the top 20 bracket. These are the poorest counties and they have high rate precepts. If we regard rates as taking from the haves to give to the have nots, in our case it is taking from the "have nots" to give again to other "have nots". I assure the Minister that there will be strong resistance to any increase that is proposed in the rate precept for the current year. If commercial ratepayers are backed by the domestic ratepayers I can foresee an ugly situation in my part of the country.

It is an area which has already been impoverished by the agricultural situation and the low prices given to the livestock farmers. There is every argument for special treatment for the rural areas. They are extreme not only in terms of low income but of low-density population. The formula seems unable to cope properly with such a situation. Reference is made to acreage above 1.5 per head. The acreage in Gwynedd is 4.3 per head. That is way above the reference point.

Gwynedd has to cater for an enormous increase in its summer population owing to the influx of holidaymakers. Further, it is the retirement area for Lancashire and the Midlands. We all know that the elderly have special needs, and those needs are catered for in my constituency. The national needs formulae, ingenious as they are, do not take these special factors fully into account. The only answer would seem to be a special allocation for the areas of exceptionally low income and low-density population. I hope that the Minister will see his way clear to providing this. Otherwise I see a very grave problem ahead. If that were done, other, more normal, areas would get a fairer deal in relation to one another.

I reiterate that if the Government are not able to give special attention to these low-income, low-density areas largely dependent on agriculture, which is suffering at present, I see grave political troubles ahead. There will certainly be political repercussions for the Government.

I regret that, as a Welshman, I am largely alone in this debate, like the hon. Member for South Angus, but I assure the Government that my colleagues on both sides of the House will return with vigour to this subject if the Government do not react in the way we hope for.

9.5 p.m.

Mr. Hugh Rossi (Hornsey)

This has been a serious and sober debate as is befitting a subject which is causing agonies of anxiety to families throughout the country. Hon. Members on both sides of the House have reflected that anxiety in the speeches they have made on behalf of their constituents.

My hon. Friends the Members for Bedfordshire, South (Mr. Madel), Hastings (Mr. Warren) and Arundel (Mr. Marshall) have said that local feelings are so intense that they fear a rate revolt if the rates increase to the extent forecast for April. The hon. Lady the Member for Barking (Miss Richardson) said that the rates in her area might increase by £2 a week in April and that that "will defeat many families". In my constituency, where we had an increase of 30 per cent. in the rates last year, an increase of 60 per cent. is forecast in the coming year. That will mean a rate demand of more than £1 in the pound of rateable value. I do not think many local authority areas will have that distinction. There will be real despair for many, many households and ruin for countless small businesses in my constituency.

Therefore, it is not surprising that a sober mood has gripped the House as in recent weeks one authority after another has forecast rate increases of 50, 70 and even 100 per cent. over this year's tremendous and crippling increases.

The one discordant note we have heard in the debate was struck by the Secretary of State for the Environment, who made a speech of a levity completely unbecoming the seriousness of the situation. Last week, in answer to my question, he joked that he did not think that the rates would go up as much as 100 per cent. He had the good grace then to apologise for a joke in bad taste. But today he sneered and jibed his way through his speech, making a cheap and unbecoming attack on my right hon. Friend the Member for Finchley (Mrs. Thatcher), who was not in the Chamber at the time. Clearly—the Secretary of State admitted this—he had nothing constructive to offer, so he played for laughs from the appreciative claque in the tiers behind him. Those laughs will not be echoed in the hearts of local authorities and ratepayers when they realise that the right hon. Gentleman will hardly lift a finger to help them.

None of this should surprise us, because in February 1973, in Newcastle, the right hon. Gentleman made his position perfectly clear. He said: Taxation should be higher under a Labour Government if we are to carry out our social programmes. We shall never find another source of as much money as accrues through the rating system. That is the attitude of the right hon. Gentleman to this subject. What is more, hon. Members who were here will remember that in the summer the Secretary of State resisted the proposal that immediate interim relief should be given to domestic ratepayers. My right hon. Friend the Member for Finchley carried the House with her on that occasion and defeated him. He had to find £150 million to help ratepayers, and he has never forgiven her for making him do it.

What did the Secretary of State say in his speech today? Essentially he made three points. He said: "It is not my fault that the rates are so high. It is the fault of reorganisation carried out by the last administration." Secondly, he said—this is now being echoed in comments from sedentary positions—that the Conservatives did nothing to reform the rating system between 1970 and 1974. Thirdly, he said, in effect, that the Conservatives should not have embarrassed him during the General Election campaign by bringing forward proposals which he could not now accept without losing face.

Let me take each of those propositions, which I reject as false alibis for doing precious little. First, on reorganisation the right hon. Gentleman knows quite well that all political parties were agreed that after 80 years the structure of local government needed modernising. It was the Labour Government of 1964–70 who set up the Redcliffe-Maud inquiry into local government reorganisation. This contained one major defect. There were no terms of reference to consider and study local government finance at the same time as other matters. If that had been done it is possible that things would have been different. But the Labour Government at that time accepted the Redcliffe-Maud report which implied huge unitary authorities which would have produced similar results in financial terms as has the present structure. This is because local government salaries, gradings and posts depend entirely on the size of population and the responsibilities that the officers undertake. That would have flowed equally under the Labour Party's proposal as under ours. Therefore, there is no alibi here, even though the Secretary of State tries to trot out alibis on these occasions.

After the event we felt that local authorities had overdone it. They had over-gingered the gingerbread. They had created establishments that were far too elaborate and they had, in many cases, paid salaries that were far too high. That is why my right hon. Friend the Member for Crosby (Mr. Page) as Minister of State ordered an inquiry into the situation. The present Government have buried the results of that inquiry. We are still waiting to hear those results.

My hon. Friend the Member for Southend, West (Mr. Channon) in opening the debate made the point to which the right hon. Gentleman did not reply, although he had an opportunity to do so. My hon. Friend asked about the inquiry and the results. He also asked when are we to be told the results. There was complete and utter silence. But we still want to know. The country still wants to know, and it still wants an examination into local government structure. Do not let us hear any more from the Government side of the House about this canard regarding local government reorganisation.

The next point raised by the Secretary of State was that the Conservative administration did nothing except produce a Green Paper in 1971 which led ultimately to the conclusion that it would be difficult to replace the rating system. Before he throws that kind of stone, let him refer to the statements that the late Richard Crossman made in the House when he was Minister of Housing in 1965. He said: what we face now is a situation in respect of rates which is so serious that we must introduce reform and a radical change in the shortest possible time. He went on to say: No one can afford to tolerate rates going up at a compound interest of 8 per cent. … The system must be changed. He gave this pledge on behalf of his Government in May 1965: We shall reform the rates."—[OFFICIAL REPORT, 5th May 1965; Vol. 711, c. 1492.] The Labour administration of 1964–70 came and went, and nothing was done. Let not the right hon. Gentleman throw stones in that glasshouse.

It was left to us to institute the study in the form of the Green Paper. Meanwhile we transferred the whole cost of the National Health Service, plus 90 per cent. of student grants, from local authorities to the Exchequer, the transfer of a burden of £348 million. Do not let the right hon. Gentleman say that we did nothing.

When rating revaluation took place in 1973, after a deliberate delay of 10 years by the Labour Government—as they are doing again now—Anthony Barber gave relief to ratepayers of one-half of any increase above 10 per cent. [HON. MEMBERS: "Oh."] Government supporters may scoff, but the ratepayers will be well pleased if the Secretary of State gives relief today of one-half of any increase above 10 per cent. Let him do that.

Furthermore, we consistently raised the rate support grant until it reached the unprecedented high level of 60.5 per cent., about £3,500 million. Let us hear no more of that nonsense from the right hon. Gentleman. If he has nothing better to say to the House, he had better stay away.

The events of last winter and the inflation to which we were subjected, including the quadrupling of oil prices, completely transformed the situation. That is essentially what caused rates to go up to an unprecedented level.

I now come to the election campaign, when my right hon. Friend the Member for Finchley came forward with her proposal that, in addition to the health services and student grant transfers that had already been achieved, we should transfer the cost of teachers' salaries, the police and fire services. That would have meant another £500 million.

Mr. A. W. Stallard (St. Pancras, North)

What stopped the hon. Gentleman's Government from doing that in 1973?

Mr. Rossi

We did what was necessary in 1973 and we did not have complaints made against us as complaints are being made against the Government now, and will be made from the ratepayers.

The Secretary of State made a great fuss about the proposal of my right hon. Friend the Member for Finchley during the election campaign for a James-type inquiry, sitting every day of the week—not a leisurely one, more suited to the right hon. Gentleman's character than to hers, sitting fortnightly—to produce a report in 12 months, not by the end of 1975, so that rating reform could start as rapidly as possible. The languor of the Secretary of State stands out in sharp contrast to the determination and drive of my right hon. Friend. Therefore, he retreats behind his shield of sneers and cheap cracks.

Enough of the right hon. Gentleman. Let us examine the problems that face local authorities and see what should be done to help them. Since 1947 this House has passed over 1,000 Acts of Parliament imposing new powers and duties on local authorities, and a whole range of Government Departments are constantly pressing for action on that legislation. The effect is cumulative because today local authorities are inescapably committed to a growth of between three and nine per cent. in the forthcoming year. The effect on their costings is obvious.

In the last seven years local authorities have been in a ferment of reorganisation as a result not only of RedcliffeMaud but also of the reorganisation required by Parliament of the education services, the social services, town planning, housing, rents and rate rebates and the whole area of public participation in every field. As the right hon. Member for Jarrow (Mr. Fernyhough) said, we cannot expect local authorities to provide the services we press them to provide in answer to constant requests on the Floor of the House and not expect a large bill to pay at the end of the exercise. The situation would have been containable and tolerable were it not for inflation which has taken everybody completely by surprise. Nobody lays any blame on the right hon. Gentleman for that.

What is the effect of the situation? It is an effect which we shall have to study and in relation to which the Secretary of State for the Environment has said he will give aid to the local authorities. Very few local authorities have allowed for what they consider to be the rate of inflation which they have undergone this year, namely, a figure of 17 per cent— not 8.4 per cent. or even 26 per cent. The local authority associations after their analysis have arrived at the figure of 17 per cent. Let us add to that the crippling interest charges which local authorities have to pay on their school and house building programmes. I do not think anybody so far in the debate has mentioned the problem faced by local authorities in servicing the current loan charge which is at a peak of £22,000 million.

What the local authorities have asked the Secretary of State to do—I cannot see why he has refused—is to give assistance to get them out of that situation which they have faced in the last two years. First, they want the right hon. Gentleman to accelerate the instalments of the rate support grant because the sooner they receive those instalments from central Government the less will be their borrowing debt and interest charges. But I emphasise that the right hon. Gentleman has refused to take that action and he has given no explanation.

Local authorities have also asked the right hon. Gentleman—it is a reasonable request—to make good their 1974–75 deficiency, which has arisen wholly because of inflation. That is an enormous sum of money amounting to £1,500 million. That is the figure needed to offset the cost of inflation this year on local authorities. Local authorities have an extremely powerful argument in making that request. The increased revenue resulting from inflation goes to central Government. As incomes rise, so the income tax on those incomes grows, is collected and goes to the central Government. But this does not happen to the rates. As we know, rates are not a buoyant tax.

Therefore, it is not unreasonable for local authorities to say "As our basis of taxation is static, whereas that of the central Government is buoyant and you are getting an advantage from inflation, why not pass on to us that element which will take away from us all the problems arising because of inflation entirely outside our control?" The Secretary of State rejects that entirely—

Mr. Stallard

So did the Conservative Party.

Mr. Rossi

We were not in that position. If we had been, we would have reacted to it. Our position has been made plain in the past few months, whether or not Government supporters accept it.

Mr. Ronald Brown

It was the Conservatives who caused it.

Mr. Rossi

The local authorities are left with three options. The first is that they must obtain a substantial increase in the rate support grant for next year, as has been suggested by my hon. Friend the Member for Ripon (Dr. Hampson) and by the right hon. Member for Fulham (Mr. Stewart). I take it that the Secretary of State cannot disclose his hand before going into his negotiation on 26th November. But let us add our plea in this House to that of the local authorities that the necessary finance is made available to the local authorities. Let us do that. by the vote that we shall have in a few moments' time.

The second option is a substantial increase in rate demands. I need not describe what that implies for ratepayers. There is no need to go further into that possibility.

The third option which has been referred to by a number of hon. Members in the debate is a substantial cut-back in services. If that is what the Secretary of State advises local authorities to do, is he prepared to give them guidance about the services which should be cut? We have had from him not a word about that. It may be that the Minister for Planning and Local Government will tell us what he feels the cuts in services should be if the rate support grant is not increased to the extent that the local authorities feel to be necessary.

Mr. Stallard

In the same way as we asked the Tory Government to do in 1973.

Mr. Rossi

Having said that, it would be wrong to conclude this discussion without a word to the local authorities about their own spending. There is indignation thoughout the country about the size of their structure, the size of their establishment and the salaries being paid. In my own authority we now have one local government employee for every nine families.

Mr. Ronald Brown

It was set up by the hon. Gentleman's party.

Mr. Rossi

We did not set up the officer establishment. That was done by the Labour-controlled Haringey council.

As for economies, we all receive conflicting suggestions. Let me put one or two of them to the House. One teacher came to me saying "It is dreadful. I have to make my children draw on both sides of the same sheet of paper because money is so tight", as though that was really to be deplored. Another teacher came to me saying "I worry when I see a five-year-old child destroy in five minutes a piece of paper which costs 5p., and I wonder what benefit that child gets out of it."

Another constituent—[Interruption.] I am reporting to the House what a member of the teaching profession has said to me. Hon. Members must make their own judgments upon it. Someone else has said to me "Is it right that my wife, who is earning £40 a week, should get a free pass on the buses because she has just passed her 60th birthday?" This is a matter that hon. Members and ratepayers can judge for themselves.

Is it right, for example, that the London borough of Greenwich should be changing at this moment from discs to cassettes in its record lending library? That is a small matter, but the bill at the end of the year would be worth examining.—[Interruption.] It seems too much to impress on Labour Members that local authorities should conduct their financial affairs in much the same way as one expects them to conduct their personal financial affairs—not simply "Can I afford it?" but "Is it really necessary, or can I do without it? How much more important is that question when one is dealing not with one's own money but with other people's.

This should be the basis of public expenditure, but, obviously, this is not the kind of comment to which Labour Members take kindly. This is why we get such statements as we had from the Secretary of State, about rates being the best form of tax for collecting money for this kind of expenditure.

Another example came to mind the other day. An organisation produced a report to the effect that in a certain school children who were receiving free meals were sat at a separate table from children who were paying for their meals.

Miss Betty Boothroyd (West Bromwich, West)

Shame.

Mr. Rossi

I agree that one cannot see the necessity for that. One would have thought that it was not beyond the bounds of ingenuity to have arranged a system whereby the children receiving free meals were not indicated in that way. But what was the suggested solution? It was not an administrative alteration but the provision of free school meals for everyone, at a cost of £250 million across the country. It is when concepts like that are put forward seriously and pressed upon local authorities that ratepayers get these enormous bills.

What is required is an eye to economy that has not existed in our town halls up to the moment. I hope that the right hon. Gentleman will insist upon this in his negotiations with the local authorities, because it is something that we should certainly have insisted upon. However, given all the factors that we have discussed, the situation brought about by inflation and the appalling debt of local authorities, with forward commitments that they cannot escape, it behoves the Secretary of State not to joke and sit back languidly but to take action and help.

9.34 p.m.

The Minister for Planning and Local Government (Mr. John Silkin)

I should like to start by adding my congratulations to those of my right hon. Friend to the hon. Member for Southend, West (Mr. Channon) on three things. I congratulate him first on his new promotion. Second I congratulate him on his great courage. I know what he has been through in being present in the House at all today, because he has been in some pain. Third, I congratulate him on his courage in opening the debate. It was a job which was, perhaps, bequeathed to him by one of his many predecessors, and which I am sure that he, with the common sense that he has, would never in a million years have asked for.

I wish that I could equally congratulate the hon. Member for Hornsey (Mr. Rossi). He started with a bang and ended with a most curious whimper. I want to impress upon him one point. When my right hon. Friend the Secretary of State was referring to his right hon. Friend the Member for Finchley (Mrs. Thatcher) there was, I think, a considerable amount of amusement, but it really was not confined to the benches on the Government side of the House. I think that it was felt on both sides of the House. I pay the right hon. Member for Finchley the compliment that I am absolutely certain that she too will enjoy what he said.

I said that the hon. Member for Hornsey ended with a whimper. It was rather a whimper. After launching a long polemical attack on what his hon. Friend rightly said was a matter which should be conducted with understanding and sympathy across the Floor of the House, he ended up with discs and cassettes in Greenwich. At that stage I lost him, and I am afraid that the rest of the House lost him too.

My right hon. Friend the Member for Jarrow (Mr. Fernyhough) made the point that we should all bear in mind: that local authority services need to be paid for. That point was amplified by my hon. Friend the Member for Sheffield, Brightside (Miss Maynard). The question is, very simply, how?

Let me say straight away that I accept that the rating system, at least in its present form, appears to have very few friends, and this of course—I accept it—is primarily the radical consequence of inflation. It is in major part, though not in sole part, the massive upsurge of inflation in the past years which has exposed the weakest points of the present rating system. But for that we might have seen many hon. Members and one or two right hon. Members leaping gallantly to the system's defence. But for that we might have encountered again the same hostility to change that the right hon. and learned Member for Hexham (Mr. Rippon) showed when he was in a position to consider the workings of the system.

That is all history. The rates rose steeply and the movement for change gained many new adherents. I do not know whether my right hon. Friend the Member for Fulham (Mr. Stewart) qualifies as a new adherent or a medium-term adherent, but he analysed the need for change with a lucidity which I envy. But it seems to me that if there is to be change it requires three things. It must be well thought out, it must be impartial and it must be lasting.

That was why my right hon. Friend last June announced the setting up of the Layfield Committee. I know that this move was welcomed throughout the House. I was, therefore, just a little surprised during the last election to hear the right hon. Member for Finchley defending a number of instant and far-reaching changes to the rating system even before the Layfield Committee had got to grips with the problem. Domestic derating and the transfer to the Exchequer of the payment of teachers' salaries figured prominently in the Conservative election manifesto.

Mr. Stallard

They never did it. Bribery.

Mr. Silkin

As we can see and hear—late-comers as well as those who have been here throughout the day—these demands were repeated in the House today, notably by the hon. Member for Southend, West, but, of course, by many other hon. Members.

I am not saying that those who call for these measures are necessarily wrong. There is every reason why those who feel strongly that these measures are the answer should make their views known to the Layfield Committee. I hope that the hon. Member for South Angus (Mr. Welsh) will inform the three Scottish members of the Layfield Committee of his anxieties on this score. It would be quite wrong for the House to act upon them now before the Committee has had a real chance to consider them in the light of all the possibilities that exist. To do otherwise would be merely to preempt the judgment of the Layfield inquiry.

Suppose that the inquiry were to produce a solution commanding a large degree of support in all quarters but which in fact ran counter to the ideas the right hon. Lady, the hon. Gentleman and their Friends have put up. The House would then have to do another turnabout, with all the administrative inefficiency that that would entail. If we want Layfield to succeed, if we want Layfield to produce a really lasting system, we must give the committee its head without preconditions.

Mr. Douglas Hurd (Mid-Oxon)

The committee is meeting once a fortnight.

Mr. Silkin

The hon. Gentleman is being a little unjust, not only to Mr. Layfield, who is a very distinguished lawyer, but also to, among others, those members of his own party who are on the Layfield Committee. They are not meeting once a fortnight to go slowly. They are as much, and perhaps more, aware of the urgency as is the hon. Gentleman. What they are concerned with at present is the taking of written evidence. If the hon. Gentleman can read, he knows that reading written evidence takes some time.

Mr. Channon

Let us assume that the Layfield Committee comes up with a solution that involves the radical recasting of the rating system and its abolition. What then will be the timetable before proposals are brought before the House?

Mr. Silkin

It would rather depend upon how radical those proposals were and when the committee brought them forward. The hon. Gentleman would need as much time as I would to examine them and to see that we felt they were right—[Interruption.] I did not notice the hon. Member for Stretford (Mr. Churchill) objecting to the setting up of the Layfield Committee. Perhaps he should talk to some of his Conservative friends, who may give him a better idea of what is going on.

Let us suppose that the Layfield Committee is taking a certain amount of time in considering written evidence. Is that so important provided that the committee's answers are correct? The removal of teachers' salaries to the Exchequer, for example, is an idea that requires some thought and analysis. It may be right or it may not. At least we should be satisfied that it can be done without fatally damaging the independence of local authorities.

The right hon. Lady the Member for Finchley had to conceal her amusement, she said—this is HANSARD for 5th November at col. 895—at the sight of local authorities queueing up to ask the Secretary of State for more money, and she said in so many words "What price independence now?" There is a real problem here. Where can one turn for advice?

Why not turn to the Conservative Green Paper, "The Future Shape of Local Government Finance", Cmnd. 4741? The hon. Member for the Isle of Wight (Mr. Ross), in a characteristically fair speech, quoted part of it from Appendix 1, paragraph 1.22. Perhaps hon. Members would care to listen to their own Conservative Green Paper. This is what it says: … it is a cardinal feature of our educational system that local authorities are responsible for the satisfactory staffing of their schools, and thus for the employment and conditions of service of their teachers. Leaving local authorities with these responsibilities while passing the bill to central government would sharply divorce financial from managerial responsibility. It would also hinder the development at local level of better forward planning of educational expenditure, which requires that all the resources involved —teachers, buildings and equipment—should be taken into account on a common basis when expenditure decisions are taken. These are important words and, furthermore, words which at that time had no doubt been cleared with the Secretary of State for Education and Science who, as it happened, was the right hon. Lady herself. Instead, there are those who claim to detect the right hon. Lady's own hand in the drafting as clearly as if she had put her fingerprints upon it. I do not argue that one must always be consistent, but a change in principle does require some deep consideration. Principles ought not to be changed as easily or as frequently as handbags.

Mr. Graham Page

Will the right hon. Gentleman allow me?

Mr. Silkin

No, I do not think I can. Time is going by.

Mr. Page

rose—

Mr. Silkin

All right, make it quick.

Mr. Page

I am much obliged to the right hon. Gentleman. He was quoting from a Green Paper which is a consultation paper. The arguments on the other side were also set out in that paper. One cannot select one sentence in a Green Paper as Government policy.

Mr. Silkin

The right hon. Gentleman for once is on a terribly bad point. The point I was making was that this matter requires, as the Green Paper said, very deep consideration. It was not something to be done by a snap of the fingers. That is the whole point. The right hon. Gentleman has made my point for me.

A number of hon. Members raised questions about their own local authorities, my hon. Friend the Member for Barking (Miss Richardson) in particular and the hon. Members for Hastings (Mr. Warren) and Northampton, South (Mr. Morris). The hon. Member for Conway (Mr. Roberts) gave us an interesting and rather helpful intervention. I thought I detected some sympathy with the Government in what he said when pressing the claims of his own authority.

I have been most impressed by the resourcefulness that many local authorities have shown during the year in devising proposals for improvements in the formula. I remember a letter from an English county, which shall be nameless, setting out five distinctly odd suggestions and finishing up with a plea for me to adopt any or all of these or any other measures which would increase our share of the grants. I think the hon. Gentleman showed himself very much in that style.

Mr. Wyn Roberts

rose—

Mr. Silkin

No, I do not think I can give way again. I have given way, I think, more than any other hon. Member today. Both the hon. Member for Southend, West and I have done so, but the hon. Member and I are both suffering slightly at the moment, and it is rather nice to sit down.

Mr. Roberts

May I remind the right hon. Gentleman what his right hon. Friend said on 27th June, which was a firm pledge to take full account of the low-income areas and also of the costs of reorganisation in the redrafting of the formula?

Mr. Silkin

Curiously enough, I listened to the hon. Gentleman when he spoke.

The hon. Member for Manchester, Withington (Mr. Silvester) stressed the point that the Government have a duty to assist local authorities. Of course, the Government will not stand aside. They have already demonstrated their concern for local authorities and ratepayers alike. This has been very much in the forefront of our minds during our discussions with the local authorities on the rate support grant and it is why we are treating these discussions as a matter of urgency. It is also, alas, the reason why this debate, interesting as it has been, has been so illtimed.

The hon. Member for Wellingborough (Mr. Fry) reproved us for not telling the House the ideas we have, but five days from now we shall be having the statutory meeting with the local authority associations. After that, and not before, my right hon. Friend will be in a position to tell the House what has been decided. I want to assure my hon. Friend the Member for Manchester, Gorton (Mr. Marks), who said that in future he hoped that the talks might take place in a more open atmosphere, that any idea he puts forward is worthy of consideration and my right hon. Friend and I will look into it.

Mr. Churchill (Stretford)

Will the right hon. Gentleman give way on that specific point?

Mr. Silkin

Certainly not. The hon. Member should sit down because he was not here.

We are anxious to give the House any information we properly can. While, as I have said, we cannot forecast the future of the rate support grant, I can deal with another matter which is often mentioned in connection with rates.

Several hon. Members have been concerned about the position of householders whose homes are not connected to the public sewerage system but are still required to pay the water authority rates in full. The hon. Members for Bedfordshire, South (Mr. Madel), Arundel (Mr. Marshall), and Ripon (Dr. Hampson) raised this point today. The House will have seen the announcement by my hon. Friend the Minister of State in a Written Answer today of the Government's decision that such householders should receive some relief from the start of the next financial year. The relief will be set at 50 per cent. of the general service charge. In arriving at this figure we had to strike a balance. The general service charge covers a number of services from which everyone derives some benefit. For instance, it covers the cost of river pollution prevention, surface water drainage, sewerage and sewage disposal, and these confer a general benefit on the community as a whole, not simply on those who are connected to the system.

We also have to bear in mind that the amount given by way of relief has to be recovered from the other properties in a water authority's area. Nevertheless, the Government think it right that this substantial relief should be given, and I hope very much that the House will welcome our decision. [HON. MEMBERS: "Hear, hear."] I had hoped to hear some cheers from the Conservative benches.

Some hon. Members wanted us to use the power which my hon. Friend the Member for Widnes (Mr. Oakes) was instrumental in having included in the Local Government Act. It enables the Secretary of State to pay a share of the needs element to non-metropolitan districts or to metropolitan counties. It would be premature to do so in 1975–76. Local authority opinion at the moment is rather divided on the issue, but my right hon. Friend has promised that it will be re-examined at an early stage of our preparations for 1976–77.

Mr. Channon

Festina lente!

Mr. Silkin

Festina lente is an admirable expression provided that after one has "festina'd" the result is adequate, fair and to the point.

The duty of the Government to assist local authorities must be matched by an additional effort on the part of the local authorities to exercise restraint. I do not under-estimate the very real problems involved in such restraint. One of the additional problems the authorities have to suffer arises because the last Government told them to rate for only 9 per cent. inflation. Consequently, they are now incurring huge deficits which they have to finance by borrowing at a time when interest rates have reached staggering levels. Even with no growth in services, local authorities' cash requirements would therefore be soaring. It follows that restraint, which is necessary at all times, is even more necessary today.

As my right hon. Friend the Chancellor of the Exchequer said in his Budget Statement: If the Government are to help in moderating the rate increases for the coming year the councils will have to play their part. They must limit the rise in their expenditure to what is absolutely inescapable, and in particular they must rule out a further expansion of their staff such as has been taking place in the last few years."—[OFFICIAL REPORT, 12th November 1974; Vol. 881, c. 271–2.] I should point out to the hon. Member for Southend, West that the reason why I am not disclosing the survey of manpower after April 1974 is that we are not in a position to know very much about it at this stage.

Mr. Graham Page

What has happened to the report?

Mr. Silkin

The report was for 1973–74; it was not post-April 1974.

I hope that we shall carry the authorities with us in this message. We shall in due course issue a circular indicating the Government's views on how the restraint will affect their service.

I started by saying that the massive upsurge in rates was due in major part to inflation. There is another factor I should mention. The late Stephen Leacock once gave this advice to those who wished to grow asparagus: Dig a trench three years ago. My advice to the right hon. Member for Crosby (Mr. Page) is "Do not bring in your reorganisation for local government or water and sewerage three years ago." Incidentally, the question of reorganisation was well put by my hon. Friends for the Members for Bishop Auckland (Mr. Boyden), Hackney, South and Shoreditch (Mr. Brown) and West Bromwich, Fast (Mr. Snape).

Mr. Gordon Wilson (Dundee, East)

rose—

Mr. Stallard

The hon. Gentleman has only just come in.

Mr. Silkin

Reorganisation and high interest rates have intensified the difficulties we face. For the Opposition, who were responsible for this calamity, against all our advice, to divide the House tonight, is as impudent as it is irrelevant, as my hon. Friend the Member for

Meriden (Mr. Tomlinson) said. I call upon the House to defeat them decisively.

9.58 p.m.

Mr. Churchill (Stretford)

The House will be bitterly disappointed that the right hon. Gentleman has given no assurance about the special situation of Trafford. [Interruption.]

Mr. Speaker

Order.

Mr. Churchill

I ask the right hon. Gentleman in particular to consider the position of the metropolitan districts of Trafford, Tameside and Knowsley, the only ones which have no county borough base, and the Government's refusal to give help to those areas which are most hit or to restrain the massive rate of inflation going on under this Government, whose policies will be overwhelmingly rejected by the people.

Question put, That this House do now adjourn:

The House divided: Ayes 264, Noes 313.

King, Evelyn (South Dorset)	Mudd, David	Speed, Keith
King, Tom (Bridgwater)	Neave, Airey	Spence, John
Kitson, Sir Timothy	Nelson, Anthony	Spicer, James (W Dorset)
Knight, Mrs Jill	Neubert, Michael	Spicer, Michael (S Worcester)
Knox, David	Newton, Tony	Sproat, Iain
Lamont, Norman	Normanton, Tom	Stainton Keith
Lane, David	Nott, John	Stanbrook, Ivor
Langford-Holt, Sir John	Onslow, Cranley	Stanley, John
Latham, Michael (Melton)	Oppenheim, Mrs Sally	Steen, Anthony (Liverpool)
Lawrence, Ivan	Parkinson, Cecil	Stewart, Donald (Western Isles)
Lawson, Nigel	Pattie, Geoffrey	Stewart, Ian (Hitchin)
Le Marchant, Spencer	Percival, Ian	Stokes, John
Lester, Jim (Beeston)	Peyton, Rt Hon John	Tapsell, Peter
Lewis, Kenneth (Rutland)	Price, David (Eastleigh)	Taylor, R. (Croydon NW)
Lloyd, Ian (Havant)	Prior, Rt Hon James	Taylor, Teddy (Glasgow, C)
Loveridge, John	Pym, Rt Hon Francis	Tebbit, Norman
Luce, Richard	Raison, Timothy	Temple-Morris, P.
McAdden, Sir Stephen	Rathbone, Tim	Thatcher, Rt Hon M.
McCrindle, Robert	Rees, Peter (Dover & Deal)	Thomas, Dafydd (Merioneth)
Macfarlane, Neil	Rees-Davies, W. R.	Thompson, George
MacGregor, John	Reid, George	Townsend, Cyril D.
Macmillan, Rt Hn M. (Farnham)	Renton, Rt Hn Sir D. (Hunts)	Trotter, Neville
McNair-Wilson, P. (New Forest)	Renton, Tim (Mid-Sussex)	Tugendhat, Christopher
Madel, David	Rhys Williams, Sir Brandon	van Straubenzee, W. R.
Marshall, Michael (Arundel)	Ridley, Hon Nicholas	Vaughan, Dr Gerard
Mates, Michael	Ridsdale, Julian	Viggers, P. J.
Mather, Carol	Rifkind, Malcolm	Wakeham, John
Maude, Angus	Rippon, Rt Hon Geoffrey	Walder David (Clitheroe)
Maudling, Rt Hon Reginald	Roberts, Michael (Cardiff NW)	Walker Rt Hon P. (Worcester)
Mawby, Ray	Roberts, Wyn (Conway)	Walker-Smith, Rt Hon Sir Derek
Maxwell-Hyslop, Robin	Rodgers, Sir John (Sevenoaks)	Wall, Patrick
Mayhew, Patrick	Rossi Hugh (Hornsey)	Walters, Dennis
Meyer, Sir Anthony	Rost, Peter (SE Derbyshire)	Warren, Kenneth
Miller, Hal (Bromsgrove)	Royle, Sir Anthony	Weatherill, Bernard
Mills, Peter	Sainsbury, Tim	Wells, John
Miscampbell, Norman	St. John-Stevas, Norman	Whitelaw, Rt Hon William
Mitchell, David (Basingstoke)	Scott, Nicholas	Wiggin, Jerry (Weston-s-Mare)
Moate, Roger	Shaw, Giles (Pudsey)	Wigley, Dafydd (Caernarvon)
Monro, Hector	Shelton, William (Lambeth, St)	Winterton, Nicholas
Montgomery, Fergus	Shepherd, Colin	Wood, Rt Hon Richard
Moore, John (Croydon C)	Shersby, Michael	Young, Sir George (Ealing)
More, Jasper (Ludlow)	Silvester, Fred	Younger, Hon George
Morgan, Geraint	Sims, Roger
Morgan-Giles, Rear-Admiral	Sinclair, Sir George	TELLERS FOR THE AYES:
Morris, Michael (Northants)	Skeet, T. H. H.	Mr. Adam Butler and Mr. John Stradling-Thomas
Morrison, Charles (Devizes)	Smith, Dudley (Warwick)	Mr.John Stradling-Thomas
Morrison, Peter (Chester)

Division No. 13.]	AYES	[9.59 p.m.
Adley, Robert	Cope, John	Gow, I. (Eastbourne)
Aitken, J. W. P.	Cordle, John H.	Gower, Sir Raymond (Barry)
Alison, Michael	Cormack, Patrick	Gray, Hamish
Amery, Rt Hn Julian	Corrie, John	Grieve, Percy
Arnold, T.	Costain, A. P.	Griffiths, Eldon
Atkins, Rt Hn H. (Spelthorne)	Critchley, Julian	Grist, Ian
Awdry, Daniel	Crouch, David	Grylls, Michael
Bain, Mrs Margaret	Crowder, F. P.	Hall, Sir John
Baker, Kenneth	Davies, Rt Hon J. (Knutsford)	Hall-Davis, A. G. F.
Banks, Robert	Dodsworth, Geoffrey	Hamilton, Michael (Salisbury)
Bell, Ronald	Douglas-Hamilton, Lord James	Hampson, Dr Keith
Bennett, Sir Frederic (Torbay)	du Cann, Rt Hon Edward	Hannam, John
Bennett, Dr Reginald (Fareham)	Durant, Tony	Harrison, Sir Harwood (Eye)
Benyon, W. R.	Eden, Rt Hon Sir John	Harvie Anderson, Rt Hn Miss
Berry, Hon Anthony	Edwards, Nicholas (Pembroke)	Hastings, Stephen
Biffen, John	Elliott, Sir William	Havers, Sir Michael
Biggs-Davison, John	Emery, Peter	Hawkins, Paul
Blaker, Peter	Evans, Gwynfor (Carmarthen)	Hayhoe, Barney
Body, Richard	Eyre, Reginald	Heath, Rt Hon Edward
Boscawen, Hon Robert	Fairbairn, Nicholas	Heseltine, Michael
Bowden, Andrew (Brighton)	Fairgrieve, Russell	Hicks, Robert
Boyson, Dr Rhodes (Brent)	Farr, John	Higgins, Terence L.
Braine, Sir Bernard	Fell, Anthony	Holland, Philip
Brittan, L.	Finsberg, Geoffrey	Hordern, Peter
Brotherton, Michael	Fisher, Sir Nigel	Howe, Rt Hon Sir Geoffrey
Brown, Sir Edward (Bath)	Fletcher, Alex (Edinburgh N)	Howell, David (Guildford)
Bryan, Sir Paul	Fletcher-Cooke, Charles	Howell, Ralph (North Norfolk)
Buchanan-Smith, Alick	Fookes, Miss Janet	Hunt, John
Buck, Antony	Fowler, Norman (Sutton C)	Hurd, Douglas
Budgen, Nick	Fox, Marcus	Hutchison, Michael Clark
Bulmer, Esmond	Fraser, Rt Hon H. (Stafford & St)	Irvine, Bryant Godman (Rye)
Burden, F. A.	Fry, Peter	Irving, Charles (Cheltenham)
Carlisle, Mark	Galbraith, Hon T. G. D.	James, David
Carr, Rt Hon Robert	Gardiner, George (Reigate)	Jenkin, Rt Hon Patrick (Redbr)
Chalker, Mrs Lynda	Gardner, Edward (S Fylde)	Jessel, Toby
Channon, Paul	Gilmour, Rt Hon Ian (Chesham)	Johnson Smith, G. (E Grinstead)
Churchill, W. S.	Gilmour, Sir John (East Fife)	Jones, Arthur (Daventry)
Clark, Alan (Plymouth, S)	Glyn, Dr Alan	Jopling, Michael
Clark, William (Croydon S)	Godber, Rt Hon Joseph	Joseph, Rt Hon Sir Keith
Clarke, Kenneth (Rushcliffe)	Goodhart, Philip	Kaberry, Sir Donald
Clegg, Walter	Goodhew, Victor	Kellett-Bowman, Mrs Elaine
Cockcroft, John	Goodlad, A.	Kershaw, Anthony
Cooke, Robert (Bristol W)	Gorst, John	Kimball, Marcus
NOES
Abse, Leo	Callaghan, Jim (Middleton & P)	Dempsey, James
Allaun, Frank	Campbell, Ian	Doig, Peter
Anderson, Donald	Canavan, Dennis	Douglas-Mann, Bruce
Archer, Peter	Cant, R. B.	Duffy, A. E. P.
Armstrong, Ernest	Carmichael, Neil	Dunn, James A.
Ashley, Jack	Carter, Ray	Dunnett, Jack
Ashton, Joe	Carter-Jones, Lewis	Dunwoody, Mrs. Gwyneth
Atkins, Ronald (Preston N)	Cartwright, John	Eadie, Alex
Atkinson, Norman	Castle, Rt Hon Barbara	Edelman, Maurice
Bagier, Gordon A. T.	Clemitson, I. M.	Edge, Geoffrey
Barnett, Guy (Greenwich)	Cocks, Michael (Bristol S)	Edwards, Robert (Wolv SE)
Barnett, Joel (Heywood)	Cohen, Stanley	Ellis, John (Brigg & Scun)
Bates, Alf	Coleman, Donald	Ellis, Tom (Wrexham)
Bean, Robert E.	Colquhoun, Mrs Maureen	English, Michael
Beith, A. J.	Concannon, J.D.	Ennals, David
Benn, Rt Hn Anthony Wedgwood	Conlan, Bernard	Evans, Fred (Caerphilly)
Bennett, Andrew (Stockport N)	Cook, Robin F. (Edin C)	Evans, loan L. (Aberdare)
Bidwell, Sydney	Corbett, Robin	Evans, John (Newton)
Bishop, Edward	Craigen, J. M. (Glasgow, M)	Ewing, Harry (Stirling)
Blenkinsop, Arthur	Crawshaw, Richard	Faulds, Andrew
Boardman, H.	Crosland, Rt Hon Anthony	Fernyhough, Rt Hon E.
Booth, Albert	Cryer, Bob	Fitch, Alan (Wigan)
Boothroyd, Miss Betty	Cunningham, G. (Islington S)	Fitt, Gerard (Belfast)
Bottomley, Rt Hon Arthur	Cunningham, Dr J. (Whiteh)	Flannery, Martin
Boyden, James (Bish Auck)	Dalyell, Tam	Fletcher, Raymond (Ilkeston)
Bradley, Tom	Davidson, Arthur	Fletcher, Ted (Darlington)
Bray, Dr Jeremy	Davies, Bryan (Enfield N)	Foot, Rt Hon Michael
Brown, Hugh D. (Glasgow, Pr)	Davies, Denzil (Llanelli)	Ford, Ben T.
Brown, Robert C. (Newcastle)	Davies, Ifor (Gower)	Forrester, John
Brown, Ronald (Hackney S)	Davis, S. Clinton (Hackney C)	Fowler, Gerald (The Wrekin)
Buchan, Norman	Dean, Joseph (Leeds West)	Fraser, John (Lambeth, N)
Buchanan, Richard	de Freitas, Rt Hon Sir Geoffrey	Freeson, Reginald
Butler, Mrs Joyce (Haringey)	Delargy, Hugh	Freud, Clement
Callaghan, Rt Hon J. (Cardiff S)	Dell, Rt Hon Edmund	Garrett, John (Norwich S)

Garrett, W. E. (Wallsend)	McElhone, Frank	Sandelson, Neville
George, Bruce	MacFarquhar, R.	Sedgemore, B.
Gilbert, Dr John	Mackenzie, Gregor	Selby, Harry
Ginsburg David	Mackintosh, John P.	Shaw, Arnold (Redbridge, Ilf)
Golding, John	Maclennan, Robert	Sheldon, Robert (Ashton-u-Lyne)
Gould, Bryan	McMillan, Tom (Glasgow C.)	Shore, Rt Hon Peter
Gourlay, Harry	McNamara, Kevin	Short, Rt Hon Edward (Newcastle C)
Graham, Ted	Madden, Max	Short, Mrs Renée (Wolv NE)
Grant, George (Morpeth)	Magee, Bryan	Silkin, Rt Hn John (Lewish)
Grimond, Rt Hon J.	Mahon, Simon	Silkin, Rt Hn S. C. (Southwk)
Grocott, Bruce	Mallalieu, J. P. W	Sillars, James
Hamilton, James (Bothwell)	Marks, Ken	Silverman, Julius
Hamilton, W. W. (Central Fife)	Marquand, David	Skinner, Dennis
Hamling, William	Marshall, Dr Edmund (Goole)	Small, William
Hardy, Peter	Marshall, Jim (Leicester)	Smith, Cyril (Rochdale)
Harper, Joseph	Mason, Rt Hon Roy	Smith, John (N Lanarkshire)
Harrison, Walter (Wakefield)	Maynard, Miss Joan	Snape, Peter
Hart, Rt Hon Judith	Meacher, Michael	Spearing, Nigel
Hattersley, Roy	Mellish, Rt Hon Robert	Spriggs, Leslie
Hatton, Frank	Mendelson, John	Stallard, A. W.
Hayman, Mrs Helene	Mikardo, Ian	Steel, David (Roxburgh)
Healey, Rt Hon Denis	Millan, Bruce	Stewart, Rt Hn Michael (H'smith, F)
Heffer, Eric S.	Miller, Dr M. (E. Kilbride)	Stoddart, David
Hooley, Frank	Miller, Mrs Millie (Redbridge)	Strang, Gavin
Hooson, Emlyn	Mitchell, R. C. (Soton, Itchen)	Strauss, Rt Hon G. R.
Horam, John	Molloy, William	Summerskill, Hon Dr Shirley
Howell, Denis (B'ham, Sm H)	Moonman, Eric	Swain, Thomas
Howells, Geraint (Cardigan)	Morris, Alfred (Wythenshawe)	Taylor, Mrs Ann (Bolton W)
Hoyle, Douglas (Nelson)	Morris, Charles R. (Openshaw)	Thomas, Jeffrey (Abertillery)
Huckfleld, Leslie	Morris, Rt Hon John (Aberavon)	Thomas, Mike (Newcastle)
Hughes, Rt Hon C. (Anglesey)	Moyle, Roland	Thomas, Ron (Bristol NW)
Hughes, Robert (Aberdeen N)	Mulley, Rt Hon Frederick	Thorne, Stan (Preston)
Hughes, Roy (Newport)	Murray, Ronald King	Thorpe, Rt Hon Jeremy (Devon)
Hunter, Adam	Newens, Stanley	Tierney, Sydney
Irvine, Rt Hon Sir A. (L'pool)	Noble, Mike	Tinn, James
Irving, Rt Hon S. (Dartford)	Oakes, Gordon	Tomlinson, John
Jackson, Colin (Brighouse)	Ogden, Eric	Torney, Tom
Jackson, Miss Margaret (Lincoln)	O'Halloran, Michael	Urwin, T. W.
Janner, Greville	O'Malley, Brian	Varley, Rt Hon Eric G.
Jay, Rt Hon Douglas	Orbach, Maurice	Wainwright, Edwin (Dearne V)
Jeger, Mrs Lena	Orme, Rt Hn Stanley	Wainwright, Richard (Colne V)
Jenkins, Hugh (Wandsworth)	Ovenden, John	Walden, Brian (B'ham, L'dyw'd)
Jenkins, Rt Hon Roy (B'ham, St)	Owen, Dr David	Walker, Harold (Doncaster)
John, Brynmor	Padley, Walter	Walker, Terry (Kingswood)
Johnson, James (Kingston W)	Palmer, Arthur	Ward, Michael
Johnson, Walter (Derby S)	Park, George	Watkins, David
Jones, Alec (Rhondda)	Parker, John	Watkinson, John
Jones, Barry (East Flint)	Parry, Robert	Weetch, Ken
Jones, Dan (Burnley)	Pavitt, Laurie	Weitzman, David
Judd, Frank	Peart, Rt Hon Fred	Wellbeloved, James
Kaufman, Gerald	Pendry, Tom	White, Frank R. (Bury)
Kelley, Richard	Penhaligon, David	White, James (Glasgow, P)
Kerr, Russell	Perry, Ernest	Whitehead, Phillip
Kilroy-Silk, Robert	Phipps, Dr Colin	Whitlock, William
Kinnock, Neil	Prentice, Rt Hon Reg	Willey, Rt Hon Frederick
Lambie, David	Prescott, John	Williams, Alan (Swansea)
Lamborn, Harry	Price, Christopher (Lewisham W)	Williams, Alan, Lee (Haver'g)
Lamond, James	Price, William (Rugby)	Williams, Rt Hon Shirley (Hertford)
Latham, Arthur (Paddington)	Radice, Giles	Williams, W. T. (Warrington)
Leadbitter, Ted	Rees, Rt Hon Merlyn (Leeds S)	Wilson, Alexander (Hamilton)
Lee, John	Richardson, Miss Jo	Wilson, Rt Hon H. (Huyton)
Lestor, Miss Joan (Eton & Slough)	Roberts, Albert (Normanton)	Wilson, William (Coventry SE)
Lever, Rt Hn Harold	Roberts, Gwilym (Cannock)	Wise, Mrs Audrey
Lewis, Ron (Carlisle)	Roderick, Caerwyn	Woodall, Alec
Lipton, Marcus	Rodgers, George (Chorley)	Woof, Robert
Lomas, Kenneth	Rodgers, William (Teesside)	Wrigglesworth, Ian
Loyden, Eddie	Rooker, J. W.	Young, David (Bolton E)
Luard, Evan	Roper, John
Lyon, Alexander (York)	Ross, Stephen (Isle of Wight)	TELLERS FOR THE NOES:
Lyons, Edward (Bradford W)	Ross, Rt Hon W. (Kilm'nock)	Mr. Thomas Cox an
Mabon, Dr J. Dickson	Rowlands, Ted	Mr. J. D. Dormand.
McCartney, Hugh	Ryman, John

Question accordingly negatived.