§ 11.16 a.m.
§ Colonel Sir Harwood Harrison (Eye)
I beg to move,That this House, in view of the intolerable rate burden now being announced by many local councils, believes that steps should now be taken to phase out domestic rates and replace them by a more broadly based and fairer system; and in the meantime, urges the greatest economies on local councils and calls upon the Government to place no further burdens upon local authorities.Any Member who draws first place in the Ballot must consider himself most fortunate. I have done it on occasions before, but today our procedure is different, in that one does not have to announce one's subject immediately. However, I had no doubt that the problem most pressing on all my constituents was that of the burden of rates, as it is on the constituents of all Members.
Rates are a very old tax. No Government in this century have found a means of altering it. It was probably a defect of our reorganisation of local government that finance was not included. The Lay-field Committee is considering local government finance, but the matter is now too urgent to wait for its report. Many reports are pigeon-holed.
Rates are levied on the notional rental value of property. In the early 1900s this was an easy matter, because 80 per cent. of the houses were privately rented. But today only 14 per cent. of the houses in the private sector are rented. With the big increase in the number of owner-occupiers, which I welcome, and the small flats in big cities, which have a scarcity value demanding high rents, it is far more difficult to make a true assessment of the notional value.
I do not wish to apportion any blame, as both the main parties realise the problems. I want to alert the country to the direction in which we are heading. It is incumbent upon us in Parliament to take the necessary steps to avert disaster.
The problem has naturally been increased by inflation, but the distribution of the rate precepts, the big rise in rates, and the great change of wealth and incomes must make us ask "Is it fair? Is it just?" The answer must be an emphatic "No".
1013 Rates are frequently collected with the rent, and this is overwhelmingly so in council houses where, I am sorry to say, tenants often do not realise what amount is rates and how much rent, so that if there is an increase in the rates, even though rents are frozen, they think that it is an increase of rent. One has what can only be described as the tragic situation of council or private houses side by side and exactly similar with a widow or couple of old-age pensioners in one and three or four wage earners in the other, but the rates for each are identical, for no account of income is taken. The rate is levied on the householder, and all other wage earners in the house escape scot free.
I suppose that every Member thinks of his own constituency, as is absolutely right, and I remind the House of the big increase in rates in the rural areas such as my constituency in Suffolk as a result of the change in the rate support grant distribution announced by the Minister last March, when he said it was:very rough justice, with a strong element of the capricious about it"—[Official Report, 25th March 1974; Vol. 871, c. 551]Basically, the rural areas came off very badly, but the cities, the metropolitan areas and rural Wales did not.
I delivered to the House a petition of protest signed by more than 6,000 of my constituents. I do not say that it was as a result of that, for there were many other protests from both sides of the House, but the Minister announced that for this year there would be a rebate if the increase had been over 20 per cent. That cost the Government £150 million, but it was valuable to ratepayers.
Also in the rural areas there was a great outcry about the payment of separate water and sewerage rates. Many small councils had done good work in providing sewerage and water supplies in rural areas, but they then found themselves part of bigger authorities and penalised by having to pay for those who had done little or nothing in previous years.
Another item of expense is the establishment of big head offices. It may be said that such offices are desirable, but the question is whether they can be afforded and whether it might be better to do without them. Many of my con- 1014 stituents have been asked to pay sewerage rates when they have no main sewerage but only a cesspool. Another source of complaint is that there is no proper democratic representation on the water authorities.
The new rate demands, to be levied from April onwards, are now being issued, and the trend of all of them is upwards. We shall be lucky if they average out at an increase of 30 per cent. Last year in rural areas such as Suffolk there were many rate increases of well over 20 per cent. If the rates were £200 a year, that meant, with a rebate of £40, that the amount paid net was £160. If there is an increase of 30 per cent., that will be on the original £200, bringing that figure up to £260. This will mean an extra £100 a year, or about £2 a week.
I am thinking especially of Aldeburgh, in my constituency, where there are many retired people, not only those living on the old-age pension and social security, but others who have saved and have thought out what standard of living they want during their retirement and have provided for it out of their own work and will find £100 on top of the increase last year a very large sum. They felt aggrieved when they thought the rates were going up by 30 per cent. on what they paid last year, but this is a great deal more.
I know that the Minister's right hon. Friend said that he hoped that the increase would be on the net amount of last year, but I cannot see how that can happen. I should be grateful for some clarification, even if that clarification is not very good.
The Minister has issued Circular 171/74, which makes very sensible reading, but will he ensure that what he says there will be implemented? For instance, referring to manpower, in paragraph 8 he says:It is an essential feature of the Rate Support Grant settlement for 1975–76 that local authorities should provide for no expansion in present total staff numbers beyond the small increases necessary to meet inescapable commitments. In reviewing manpower budgets, authorities are asked to bear in mind the possibility of making savings in areas of lower priority to offset staff increases which are unavoidable elsewhere".Yet all of us in the House have a feeling that staffs are increasing.
1015 I put a Question to the Minister a few days ago to ask by how much manpower in Suffolk with few councils was greater than it was with many councils before reorganisation. The figure for June last year, the latest available, shows an increase of 350. I am fairly certain that what is common to Suffolk is common elsewhere.
I want to put in a plea for the small shopkeeper, and by that I mean very small, such as tobacconists, sweet shop owners and others. They are facing a big increase in the self-employed stamp, a subject that we debated yesterday. Many of them have served elsewhere, perhaps in the Services or as policemen, and so have small pensions. They will not be able to recover these increased costs through increased earnings, and I fear that many will be forced out of business.
I know that rates can be set against tax as part of the expense of running a business, but that holds good only when the profit is big enough to attract income tax. I remind the House that even with the bigger firms increases in rates are inflationary, as they are added to overheads, which in turn increase the cost of the goods. That is one of the causes of the rise in prices.
There is a strong feeling among the public that both councillors and staff in the new district authorities have a desire to empire-build. That is not common to all authorities, but it is true in many instances. One wonders how the payment of expenses and the payment for loss of earnings to councillors is working out. There is a widespread feeling, as shown by statements in the Press, that some councillors are making a very good living out of this arrangement.
I am not sure that at this time of economy we should not put a ceiling on these amounts, or at least make it incumbent on all local authorities to publish in the local Press how much each councillor is paid. I am sure that it will vary very widely from councillor to councillor.
Many councils make strenuous efforts to keep expenses down, but they do not hit the headlines. Any attempt at empire-building should be arrested, if necessary by action taken here. The desire to build
1016 an empire can be seen in the wish of so many councils to build new offices to house all their staff. I am quite sure that this is desirable, but it is expensive. Can we afford it at present?
I refer to the smaller services like refuse collecting. It would be appropriate if I spoke of refuse collection in this House. As more villages are included in the rather large district councils, each has to have a refuse collection manager with a secretary and an office and all that goes with it. When the councils were smaller there were at most one or three collection carts and the men knew exactly where to go without directions. It is the duty of Parliament to see that these authorities do not get out of hand.
I cannot stress too strongly the capital indebtedness of local authorities, which stands at the figure of £19,500 million, of which £500 million was raised in foreign currency in the past two years. Is it so absurd to say that local authorities are spending too much? It is estimated that the interest alone on this capital sum is costing £1,880 million a year, a vast amount. These figures were given in a ministerial reply a short time ago.
On 12th November last the Chancellor of the Exchequer said that local authority expenditure rose by £300 million to £400 million a year in each of the last five years. This rate of increase far outstrips the growth of national resources. Taken together with the effect of inflation, it represents a high additional burden on all ratepayers. Capital commitments need far more investigation and control.
The Labour Party's manifesto says:We appreciate the anxieties of ratepayers and this is why we have set up this inquiry into local finance. But everybody has to face the fact that demands for better local services have to be paid for. And these have to be reconciled with demands for more local autonomy and less central direction. Public services have to be paid for by the public; the only argument is how to share the costs, not how to avoid them".We must ask ourselves whether we can afford better services at high cost. Local authority expenditure has been growing faster than the economy as a whole. A total of 66 per cent. of this expenditure is met by the grant from the taxpayer. But still the burden on the domestic ratepayer has risen sharply. The rating system 1017 has come under increasing criticism because it does not reflect peoples' ability to pay.
The Conservative manifesto said that there would be a transfer to the central authority of the cost of teachers' salaries up to a specified number of teachers for each local education authority. Expenditure on the police and fire services would qualify for increased grants from the Exchequer. The manifesto promised that within the normal lifetime of a Parliament the domestic rating system would be abolished and replaced by taxes more broadly based and related to peoples' ability to pay. It was said that local authorities must continue to have some independent source of finance.
I ask the Government to consult the Shadow Ministers, to look at what is in both manifestos, and to see what can be done about this urgent problem. In the past few weeks we have hardly been able to open our newspapers without seeing headlines about the scandal of rates. The headline in the Evening Standard on 5th March was:Islington defies Crosland and puts £800,000 on the wages bill".This is completely contrary to what I have mentioned from the circular. Local authorities, and the chairman of my county council has told me this many times, have to carry out certain commitments imposed upon them by Parliament. We must be careful that we enact nothing in future which will entail an extra charge on our rates. There must be real evidence of this in future Bills.
I shall take one example to show how the House does not think out carefully the results of what it does. As many hon. Members know, I am the Chairman of the Defence and External Affairs Sub-Committee of the Expenditure Select Committee. When we reduced the age of majority to 18 we gave any boy of that age the opportunity to marry without his parents' consent. Many have married at that age, some happily, but some have lived to regret it and have ended up in the divorce court. This change in the law is evident in the number of men who wish to join the Services. They come married sometimes with a child. This has placed a heavy burden on the married quarters building pro- 1018 gramme. This was an unknown problem 15 years ago. It illustrates what can happen if we do not think about the consequences. The Government make the right speeches but do not have the guts to carry them out. This is what is happening with local government finance.
It is essential not only that Government Departments and local authorities should observe a moratorium—at least until the economic situation improves substantially—on the issue of circulars requiring additional expenditure by local authorities, but that local authorities should give practical evidence of stringent economic control over their affairs. We look for a period of extreme caution, especially with new capital expenditure. We consider that evidence of thrift with regard to staffing and to more peripheral items of "non-relevant" expenditure is owed to the taxpayers and ratepayers by every local authority. If such evidence is not forthcoming, public resentment will give rise to a more powerful threat to local authority autonomy than any change in the balance between centrally and locally-raised revenues for local services.
The aim of councils everywhere must be to ensure, as far as possible, that no family is faced with excessive rate demands this April. This means cutting out all waste and extravagance, even postponing many desirable projects and instituting strict spending priorities. There have undoubtedly been a number of instances of authorities adopting wrong priorities in the present serious economic circumstances.
According to the Daily Mail of 4th March, the Labour-controlled Leicester Rural District Council was prevented from borrowing £7 million at 17 per cent. interest for new town hall offices only because the banks concerned decided that to grant the loan would be contrary to the strict economic policy of the Government over public expenditure. There must be more control over this. However, according to the paper—I hope that this is not so—it seems that the chairman still thought that he could get away with it.
I could give further examples of unnecessary spending. I do not want to make too much of a party point. Since the GLC came under Labour control in 1019 April 1973, for instance, the number of staff has increased by 3,568—
§ Sir H. Harrison
I could not anticipate when I put down the motion what the Government would do. That increase is contrary to Government policy. It is estimated also that the GLC is spending about £69 million annually on taking over rented homes. Local government finance is running at £9,500 million a year, about a third of total public spending. In 1975–76, the Government's aim is that local government spending should increase by not more than 4 per cent. in real terms compared with 2¾ per cent. for public spending as a whole. All the forecasts that I can get hold of estimate that it will not be less than 7 per cent. Why should spendthrift councils burden their people with debts not only for their lifetime but for most of the lifetime of their children?
The motion is necessary and urgent, and I hope that it will be acceptable. It is not made in any strong party criticism. How we face this grave problem can be a big factor in deciding whether we survive the economic crisis. We in the House must not stand aside and let big spending authorities carry on as they like, since that might lead to the ruin of the country.
§ 11.42 p.m.
§ Mr. James Lamond (Oldham, East)
The hon. and gallant Member for Eye (Sir H. Harrison) raised many matters, some of which I agree with. Others I thought unhelpful, such as his reference to "spendthrift" councils—a description which cannot be applied to many authorities. The wisest part of his speech was his quotation from the Labour Party maniesto—good, sound common sense with which anyone with any knowledge of local government must agree. That is, whatever is done must be paid for.
Will it help to move the burden from local ratepayers to the central Government, which would mean extra taxation? It has been said that people pay taxes in sorrow and rates in anger. There is something in that. I do not know why it should be so, because they see more for 1020 their rates than they do directly for their taxes.
For about three years I was the chairman of the finance committee in Aberdeen. I am not a native Aberdonian and I suppose that the highest compliment which can be paid to anyone in financial affairs is to be placed in charge of Aberdeen's finances when he was not born there. I rejoiced in the title of "Treasurer" Lamond. This made me feel very important when I spoke in the council, but it had unfortunate side effects in the bar, since everyone seemed to think that I was treasurer there as well.
In my period of office—1967, 1968 and 1969—there was a good Government, who were of valuable assistance to local authorities. It seems remarkable now, but after my first year in office, when producing my budget for the following year, I was able to announce a reduction in the domestic rates—not due to a reassessment but helped considerably by the domestic element brought in by the Labour Government. That enabled us to reduce the rates by 1s., as it was then. I was pleased about this, because there had been a lot of agitation even then about the level of rates.
There was an active ratepayers' association in Aberdeen which was always asking me along to speak, mainly in the hope of having a go at my proposals. On this occasion I was very pleased to have a valuable weapon in my armoury, having announced only three weeks before that the rates would be reduced. The hall was packed as usual, with about 200 Tories all baying for blood. My Conservative opposite number was with me, and I called on him for assistance: "Councillor Hatch will confirm that the rates have been reduced". No one would believe me. They flatly refused to believe that the rates had been reduced. I tried many ways of explaining it, such as saying, "If you paid £70 last year, you will pay less this year in £ s. d.". Nobody believed it. After all was said and done, they still passed a resolution condemning all that we were doing.
That taught me a valuable lesson. Later, I went to Stockholm for a conference of the International Union of Local Authorities, where I met the City Treasurer of Glasgow, who had been 1021 forced to increase his rates. I was boasting to him of what I had achieved in Aberdeen, and he said. "You will be very sorry for having reduced the rates. You will get no credit or thanks. You would have been well advised to put the money in a rate reserve fund so that next year, when the rates have to go up, you will have something to draw on. Everyone will have forgotten what you did". In fact, no one knew to begin with.
The lesson that I had learned was that everyone expects the rates to go up anyway. They like moaning and complaining about it. Perhaps we might do them a disservice if we kept the rates level or reduced them.
Even in those days we seriously pruned all the estimates. I remember a long process during which, with the city chamberlain, the paid official of the city who pulled the strings and told me what to do, I met the conveners or chairmen of all the other committees to tell them where the estimates should be reduced. Since ours was a well-balanced authority—always Labour-controlled, needless to say—some conveners were Tories. The funny thing is that they were as keen as anyone to increase expenditure on the art galleries committee or the children's committee, yet in the special finance committee which we called later to discuss all the cuts they were among those who complained and voted for a blanket 10 per cent. cut, or something like that, in all the estimates.
§ Mr. Lamond
The years when I was chairman of the finance committee in Aberdeen—1967, 1968 and 1969. Even in those days there were rather illogical complaints by the Tory members that we were spending too much, although they were aware of the long process that had been gone through over many months.
That is not unique to Aberdeen—careful as it is with its money. It is also true of the Oldham local council in the constituency I represent. On Wednesday night the council finally approved the rates for this year after the most careful examination. I have here all the papers, which tell how the council had gone through all the processes and had held special joint meetings of the resources committee and the 1022 finance committee to go over all the estimates.
I do not wish to be critical of Oldham. In my maiden speech I even praised it a little. I am sure that the right hon. Member for Crosby (Mr. Page), who is very knowledgeable of the area, will bear me out in saying that one cannot go through Oldham and its neighbouring districts and say that it is obviously a place in which local government spending has been excessive. We have no well-manicured roadside plots of grass. We do not have ample housing, a lovely new town hall and a new fire station. Nor do we have new schools. We have no spendthrift luxuries, neither do we have many necessities to which the people are entitled.
§ Mr. Graham Page (Crosby)
I am sure the hon. Gentleman is right, but did not Oldham bite off more than it could chew in its rather ambitious plans, and does not that occur in many councils?
§ Mr. Lamond
I do not admit that. The right hon. Gentleman has demonstrated again his great knowledge of the area. I said that I admired his knowledge of local government, but I can hardly believe that he is so knowledgeable of every area. There is something in what he says. Oldham has a shopping precinct which is not fully occupied, although the council is hopeful that it will be. Apart from that, there are many other areas in the borough which need attention. There is no wish on the part of the local council not to do those things. It is anxious to build more houses. The housing waiting list has extended in recent years, and all hon. Members who have surgeries know from experience that there is a tremendous demand for housing which is still not met.
Only this week I have had several letters about the proposal to cut capital expenditure on schools. A feature on the front page of the Oldham Chronicle criticises the disastrous cut-back in spending on schools, and the newspaper has also launched an attack on what it calls the "excessive" rise in the rates. We cannot eat our cake and have it. If people want things they must realise that they have to be paid for.
The question arises: how do we pay for them? That aspect has been debated frequently in the House. We must point a finger at the previous Conservative 1023 Government. They knew perfectly well that a crisis was coming in local government finance, yet they pressed ahead with the reorganisation of the structure of local government but not with the reorganisation of local government finance. As the hon. and gallant Member for Eye said—rather less critically than he might have done if Labour had been responsible—perhaps finance should have been included. Of course it should have been included. That is what people complain about. Most people did not complain about the structure of local government, although they complain about it now that it has been changed. They did complain about rates. Should we not have done something about rates before setting off on the restructuring of local government?
§ Mr. Ronald Brown
The Tory Government had the experience 10 years previously of reorganising local government in London. They knew that there had been an enormous increase in the cost of local government in London because of their absurd reorganisation in 1963. Yet they wilfully went ahead with the reorganisation of local government in 1973 in the knowledge of what they had done to London.
§ Mr. Lamond
Yes, that argument was put many times in Committee on the Local Government Bill. It is unfortunate that Conservative Members did not then raise their voices as loudly as they have done in the last few months to say that the root cause of the troubles in local government is the method of raising finance.
§ Mr. Ridsdale
Was not the reorganisation of local government also supported by the Labour Government?
§ Mr. Lamond
Yes, that is true, but our proposals were different from those of the Conservative Government.
§ Mr. Charles Morrison (Devizes)
Is it not also true that when the Labour Government of the day established the Redcliffe-Maud Commission they did not include in its terms of reference the power to look into local government expenditure and financing? Was not that a great mistake?
§ Mr. Ronald Brown
Perhaps my hon. Friend will allow me to help him. The then Labour Government intended to set up simultaneously an inquiry into the finances of local government, but, because the Conservatives took control in 1970, that was never done.
I thank my hon. Friend. I was about to say that. The hon. Member for Devizes (Mr. Morrison) is correct in saying that financing was not in the original terms of reference of the Redcliffe-Maud Commission.
The small shopkeeper seems to be a very popular person on the Opposition benches. The Conservatives have raised the matter of the small trader time and again. They have just elected the daughter of a small shopkeeper to be their Leader, and I suppose the image has to be brushed up a bit. Yesterday, the day on which we debated small businesses, I read an interesting article in the Daily Express. Many of the complaints contained in it can be laid directly at the door of the previous Tory Government.
The article quoted the example of a small shopkeeper who had to go into liquidation because of rising costs. His rates had gone up from just over £200 to just over £400, but the rent of his shop had increased much more sharply because his lease had expired and he had to negotiate a new one. It would be far more sensible to lay the blame for that man's difficulties at the feet of the person who asked him for more rent than to lay it at the feet of the local authority which asked for more rates to provide services to make the area attractive. At the end of the day, those services bring a return to the small shopkeeper, whereas his rental is a direct on-cost which has little beneficial effect on his business. I do not believe we should use the small shopkeeper as a special case. If there are hardships, they are felt throughout the community.
If something is to be done, the situation should be tackled in ways which make the raising of local government finance much fairer and which make sure that everybody pays what he can. The present system has the great advantage of simplicity. City chamberlains, or treasurers as they are known in England, like such a simple system. They can 1025 work out the total and divide it by rate-able value. It is perhaps a little more complicated than that, but it is certainly much easier than trying to raise money by a local income tax or, indeed, by raising funds centrally. If we raise money centrally and take a firmer grip on local authorities—and I must point out that we should not underestimate the considerable grip that we keep on them at the moment—we must admit that we shall take away some of the autonomy which we are always saying local authorities should have.
People in local government will confirm that local councillors feel that they are the puppets of the central Government. They may be allowed to do what they wish so long as it conforms entirely with the wishes of the central Government. We have had examples in the last few years, such as the Housing Finance Act and tightly-drawn regulations, laying down what local councillors must and must not do. If we continue to take that sort of line, we must not be surprised if the standard of local councillor falls. People of great ability will not come forward to serve on local councils if they believe they are merely there to rubber-stamp Whitehall's decisions. One cannot speak of what will be said in a debate which will take place in three weeks' time, but I am sure that on the one hand we shall hear all about the need to give local authorities greater freedom and on the other hand we shall hear complaints about what they are doing financially.
I regard local councils as most responsible bodies. I have evidence in my hands of the way in which the council in Oldham recently went through all the accounts and estimates. Complaint meetings have been held in Oldham by ratepayers about an increase of 18 per cent. for domestic ratepayers and 25 per cent. for commercial and industrial ratepayers. That falls within the guidelines laid down by the central Government. It is strange that few of the people at those meetings of complaint make specific points about items which should be cut further. The people I have spoken to generally complain about items which have already been cut—for example, in respect of the day nursery provision, where the authorities in Oldham are attempting to move to a voluntary basis. Further complaint 1026 has been aroused by the fact that local libraries have to close on Saturday afternoons, which is causing correspondence in the local Press. In other words, as soon as the council takes steps to trim expenditure, it causes a barrage of complaints. Then if it does nothing about the situation or if what it does do is insufficient, there is a barrage of complaint on that score.
In the main, complaints made in ratepayers' action groups and special protest meetings are unconstructive—complaints about what has been done in the past rather than what is proposed to be done. If ratepayers ask for things to be done, they must be prepared to pay for them. I believe ratepayers are given good value for their money. I believe that we should move to a fairer system of raising local authority finance. In the present system, with all its faults, there is little to complain about in terms of any spendthrift attitude by local government. I regard local authorities as responsible bodies which are trying to do as much as they can in the face of inflation.
§ 12.5 p.m.
§ Mr. Graham Page (Crosby)
I congratulate my hon. and gallant Friend the Member for Eye (Sir H. Harrison) for choosing this subject and also for the way in which he put the matter to the House. We have heard much recently of the cash flow difficulties in industry, but local government is facing a very great cash flow problem. The cash flow of local government will become dammed up by rebel ratepayers if something is not done quickly.
It is no exaggeration to say that there is a cash collapse confronting local councils. This is nothing whatever to do with the reorganisation of local government. There has been extravagance in certain places, but I believe that the increase in the total of local government expenditure due to reorganisation is of the nature of 4.7 per cent. and no more. It is the labour-intensive nature of local government which is at the basis of the present crisis. Neither Westminster nor Whitehall can ignore that crisis. Neither Parliament nor Government can wait complacently for the medicine for the chronic sick ratepayer to be prescribed by some non-parliamentary committee leisurely diagnosing the complaint. The 1027 situation is critical and we cannot wait for Layfield to prescribe the medicine. It must be prescribed by the Chancellor of the Exchequer in the coming Budget.
To continue the medical metaphor, one might say that unless the remedial medicine is administered not later than the Budget, the unfortunate patient—the ratepayer—will become delirious when the demand notes plop on to the hall mat, showing increases of anything between 20 per cent. and 100 per cent. above last year. At this stage the patient is no longer in the hands of the general practitioner of local government, the Secretary of State for the Environment. The matter is more urgent, and the specialist surgeon, the Chancellor of the Exchequer, must be called in to perform an operation of cutting out local government financial responsibility in regard to at least four items: education, fire services, police, and interest rates on local loans.
The total local government expenditure in England, Wales and Scotland in 1975–76 is estimated at £9,079 million. But in 1974–75 the expenditure was underestimated by one-fifth. Therefore, we can expect the actual expenditure for 1975–76 to be nearly £11,000 million, of which £3,500 million will have to come from the ratepayers. I do not think the nation can afford to find £11,000 million a year continuously for local government. The ratepayer certainly cannot bear a burden of £3,500 million a year. Over half the money spent by local government goes on the four items I have mentioned—36 per cent. on education, 7 per cent. on police and fire services, and 12 per cent. on interest charges. In the Budget the Chancellor should take over, for discharge by the taxpayer, full financial responsibility for those services in the coming year 1975–76. This would give Layfield time to report and for his report to be implemented—[Interruption.] The Under-Secretary appears to find that amusing. We need Layfield quickly. I am saying that we need to deal with the crisis before Layfield but that, when Layfield reports, I hope that we shall move on it quickly.
§ The Under-Secretary of State for the Environment (Mr. Gordon Oakes)
I was smiling because if the Chancellor of the Exchequer were to prescribe the medicine being suggested by the right hon. Gentle- 1028 man there would not be much left for Layfield to do.
§ Mr. Page
There would, because I am convinced that Layfield will report that we should adopt a form of local income tax. I am not pessimistic about the length of time which would be needed to bring that into operation but, even with the most optimistic outlook, it would be the year 1977–78 before we could possibly put that into operation. Therefore, it is no good waiting for Layfield. Something has to be done in the meantime—in the next few months or even the next few weeks—or the withholding of payment of rates will dam up the cash flow of local authorities.
When demands are so high, ratepayers will resort to all lawful means of keeping the councils out of their money—by means of appeals against assessment, delaying payment of rates until summonses are served, and so on. If that happens on a large scale in any area there will come a Friday when the council will not be able to find the cash to pay its clerks, teachers, dustmen and road repairers. That is why the Chancellor should act quickly. At the same time, he should make it clear that these measures are transitional and that in this critical transitional period there will be a sharper and stricter control over the way in which local government is eating up the national resources.
Local government must slim. Both central Government and local government have to accept a strict diet for local councils. As something of a champion for the independence and autonomy of local government, I do not recklessly advocate a big brotherly or grandmotherly attitude by central Government towards local authorities. But, in the period of national monetary crisis, which, incidentally, coincides with the very young days of the new local authorities, I am sure that firmer direction will have to be given by the Government.
The new local authorities are still in their first year of office. Perhaps in too many instances they are ambitiously trying to run before they have modestly learned to walk. The Government cannot expect local authorities to function substantially more cheaply if they retain the same functions, let alone, as my hon. and gallant Friend the Member for Eye 1029 pointed out, if they are given more functions to carry out. Therefore, the slimming process must begin with the hiving-off of some local government services.
§ Mr. Albert Roberts (Normanton)
The right hon. Gentleman played a leading part in local government reorganisation. He must appreciate that 90 per cent. of ratepayers today believe that the reorganisation of local government has been the cause of the escalation in the rate demands that they have to pay. Now he is talking of hiving off many services. He must be aware that many services have been hived off from local authorities in recent years.
§ Mr. Page
If the hon. Gentleman will be patient, I shall explain what I meant by "hiving off". On his first point, I said earlier that I did not believe that the increase in rates now being announced by local authorities had anything to do with reorganisation. There is extravagance and ambition in some places, but, across the board, reorganisation has resulted in less than a 5 per cent. increase in total local government expenditure. When I spoke of hiving off local government services, I did) not intend to suggest that it should apply to the strictly social services—the care of the elderly and of children, and the care of problem families, but I am sure that a new attitude has to be adopted towards the amenity and environmental services, many of which, from refuse collection and disposal to parks and gardens and libraries, could be run more economically under contract with councils than by council employees and top-heavy council management.
§ Mr. Ronald Brown
The right hon. Gentleman says that the social services should be left alone. Is he aware that in the London borough of Hackney that element has increased from £7.5 million in last year's estimates, to between £9.5 million and £9.75 million this year?
§ Mr. Page
I am only too well aware that there are many London boroughs in which social services problems have increased and are taking a large proportion of local government expenditure. The hon. Gentleman will remember that when we imposed a monitoring on local authorities of their expenditure in one year this was the point which came out with many 1030 London boroughs—the problem families and the social problems with which they had to deal. That is why I said that would not touch services of that kind.
The economies must be found elsewhere. I believe that many councils could join in placing certain other services out to contract, with residual economies all round.
Closely connected with that concept is the power given to local authorities, under reorganisation, to enter into agency agreements with each other. The agency agreement idea has the potential of considerable economies. It has not been used as fully as I had hoped in the course of local government reorganisation. Certainly it has not been used as effectively as it should have been in planning.
§ Mr. W. E. Garrett (Wallsend)
The point made by the right hon. Gentleman about agency agreements is an important one. The reason why the idea is not operating so well, especially in metropolitan county areas, is that district councils are not convinced that agency services will give the benefit to ratepayers that was hoped for. A great deal of education has to be started in this direction.
§ Mr. Page
The Government must now be firmer about agency agreements and give better direction than I thought would be necessary when reorganising local government. Local authorities have not taken as much advantage of them as they should have.
The Government must also be firmer and even tighter with control upon staffing. My hon. and gallant Friend the Member for Eye used the expression "empire building". During the infancy of the, new authorities, this is an area in which in my view it has now been shown that the Minister for Planning and Local Government must for a time take fairly substantial control. The Minister is now in the Cabinet. He ought, therefore, to be able to carry his colleagues with him in enforcing a slimming diet on local authorities in that respect.
First and foremost, the Minister should have his own management services teams to examine the business of local government as conducted by local councils. The Under-Secretary has done valiant service in going round the country preaching economies to local councils. If I may 1031 say so, with all modesty, he has carried on my work in doing that but he has done it far more effectively than I ever did. However, more is necessary now.
I used the term "management services". That phrase might cloak the older and not so popular terms of O and M, work study, time and motion, and so on. But it has become more sophisticated, and it can now achieve real economies. The hon. Member for Oldham, East (Mr. Lamond) said that many local authorities prune, but they are still dealing within the traditional structure with traditional services. I am convinced that greater economies could be achieved if control were imposed from outside at this young stage in the development of the new authorities. I believe that hundreds of millions of pounds could be saved by that means.
For a time the Minister has to become an overlord of local councils, until our national resources are healthy enough for us to be more generous with the people's money. I would couple that enhanced position of the Minister with the kind of parliamentary control that we impose here on nationalised industries.
We ought to have a Select Committee on local government to consider what economies can be achieved. To some extent, I regret advocating greater Government or parliamentary control over local councils, but I am convinced that we face a crisis and that crisis measures are necessary.
§ 12.21 p.m.
§ Mr. W. E. Garrett (Wallsend)
I should like to add my congratulations to the hon. and gallant Member for Eye (Sir H. Harrison) on introducing this subject. It is disappointing to me that the Government side is so thinly represented. Even allowing for the fact that it is a Friday, I should have thought that many more Members of Parliament would have been interested in this important subject.
I think that all hon. Members will agree that this is a highly emotional subject. If anything is calculated to send people into degrees of financial despair it is the rate demand, showing the amount to be paid, coming through the letter box.
1032 This is a subject of which I should have some knowledge. Before coming here, 11 years ago, I had been a member of a local authority for 16 or 17 years. I well recall the many hours that I sat with my colleagues looking at estimates and judiciously pruning requirements to meet what the people in the district—the Northumberland County Council—could afford to pay. By and large, we got through with a fair degree of satisfaction.
But now, as has been stated, there is a revolt against the rating system and the paying of rates. In the North Tyneside area, in which my constituency is situated, an additional court has had to sit to issue distress warrants for the nonpayment of rates. It is an alarming situation. As the right hon. Member for Crosby (Mr. Page) said, we could have rate strikes throughout the country. If we reach that situation, we shall get the ultimate breakdown in local government.
The demand for local government services continues to increase. In general, people are somewhat hypocritical in their attitudes to this matter. They object to paying rates, yet the demand for the services continues to rise. There are demands for more police, additional fire services, better educational standards and for ancillary health services which are the responsibility of the local authorities.
I have tried to bring the question of rate payments down to a more sensible line of argument. Throughout the years I have tried to compare the value of rates with the value of what we pay for other commodities. There is no doubt that, by and large, ratepayers throughout the country get fair value for what they pay. People merrily pay for tobacco, beer, wines and spirits—
§ Mr. Garrett
—and gambling—to an enormous degree. Yet they object to paying rates.
I agree about the need to speed up the Layfield inquiry. Unfortunately, the Minister has just left his seat—no doubt for a pressing matter. When he returns I shall inform him that he ought to be motivated today to ask his Department to consider ways and means of speeding up the Layfield inquiry to see whether we can get a more satisfactory solution.
1033 I have considered the reorganisation of local authorities very closely. It is only a year since it was introduced, so we cannot be too critical. However, the point that concerns me is that we seem to be reaching a situation of less democracy in the new set-up. We are getting, for want of a better term, a commissar-type of bureaucracy. We are getting officials deciding policy and seeming to run the whole show. This is due principally to the fact that there are now two-thirds fewer councillors in the United Kingdom than there were before reorganisation. People are becoming frustrated—otherwise there would not be so many ratepayers' action groups being set up—because there are fewer councillors to explain to ordinary citizens the problems associated with their localities, the reasons why money is being spent and why the rates are so high. This matter of less democracy in local government should be of concern to all of us, irrespective of our political views.
§ Mr. Garrett
Some do and some do not. It depends on the political colour of the area. It is true that more councillors are holding surgeries, and more people are beginning to understand and attend councillors' surgeries. However, I think that everyone will agree that since the reorganisation of local government the pressure upon Members of Parliament, because of the frustration of electors not being able to contact and meet their local councillors, has increased. We are becoming the messenger boys between elected members and the new local authorities.
§ Mr. Keith Speed (Ashford)
Does the hon. Gentleman agree that there is a major education job for the schools here, to inform young people about the responsibilities of this place and of local authorities? I think that is where we are missing out, in many cases.
§ Mr. Garrett
I could not agree more. Many hon. Members speak to children, especially sixth formers, and no doubt attempt to educate them as far as possible about the need to use the machinery of local government through local councillors. I do not want to be critical of councillors; they do a grand job. The 1034 allowances paid to them are adequate and they deserve them, but they must earn their living elsewhere. Therefore, they cannot do everything that used to be done when we had more councillors. We should consider whether local authorities should extend the membership of their elected members. That would be a counter-balance to the super, highly paid executives who have outsmarted us and established empires for themselves. Reams have been written in the Press. Therefore. what I am saying is not new.
No mention has yet been made of the rating demands put upon small businesses. To be fair, the hon. and gallant Member for Eye touched on it, but he then moved to another subject. It is not generally known, but, according to the Association of Local Valuation Panels, over the past year small businesses have been expected to find 55 per cent. more on their rating requirements. That is a lot of money, especially to companies employing perhaps 20 or 30 people. This pressure could create job security problems for people employed in small businesses. If I were the Chancellor of the Exchequer I should be considering some way or other by which small businesses could be helped to overcome the terrible burden facing them.
There is no doubt that we must strike a balance. We must decide whether we want more central Government intervention in local government or whether we are prepared to allow more responsibility to lie with local government. The old saying, "He who pays the piper calls the tune", must apply. If more central Government money is to be injected into local government, clearly there will be less democratic decision at local level.
Speaking for myself, I would say that the balance is about right. If so, clearly the Chancellor cannot be involved any more. From where will the additional money come? We come back to the argument of a local income tax. There is no doubt that the rating system, stemming from the time of Elizabeth I, is decrepit. The anomalies arising from it are so unfair that they beggar description. Every one of us can give an example of a widow living in a house on her own—
§ Mr. Garrett
Yes, widows and widowers, or other persons living alone. In the next house there may be a man and his wife and three children, who may all be working, yet the rating demand on both houses is similar. That is unfair, and it strengthens the argument for a local income tax. But, it is with some trepidation that I view such a tax. I have a feeling that if we introduce a local income tax system we shall be creating more bureaucracy. We shall have to analyse whether more staff or less staff will be required before we decide to operate such a system.
We must try to speed up the Layfield inquiry. This debate can bring all sorts of conclusions, but I do not think that we shall achieve general agreement. However, if we have done anything we have analysed and highlighted some of the problems that face ordinary citizens. We must ask ourselves again whether we are to curtail local government services or increase them. Are we, as I think we shall have to do, keeping a closer watch on expenditure? We must be supercritical in our analysis of the amount of money that has to be spent. We must emphasise more and more the need for value for money. We are in a highly inflationary situation, which may continue for quite a few years. Local government is a highly labour-intensive industry and its costs are bound to rise. If the costs are shown to be rising in a fair manner I think that most ratepayers will agree that the money is being well spent and used to the fullest extent.
I hope that my hon. Friend will give us an assurance that the Government are as concerned as we are about the whole matter. I know that the Government have told local authorities publicly that there should be a limitation on the increase in rates. An increase in the region of 30 per cent. has been suggested. Even so, that is an astronomical figure. I dare say that the increase that is being sought by some local authorities is less than that, but some authorities are being pressurised to go beyond 30 per cent. It is a difficult situation, and there is no easy answer. However, there is no need for despair. I believe that local government is basically sound. I do not want to see its power diminish, but I seek an assurance from local authorities that they are doing their best to give value 1036 for money. If they do that, I think that Parliament will be satisfied.
§ 12.34 p.m.
§ Mr. Charles Morrison (Devizes)
The hon. Member for Wallsend (Mr. Garrett) began by expressing disappointment that not more of his hon. Friends are present for this important debate. Obviously they are not unaware of the problems of the rate burden, but I could not help wondering whether there are relatively few of them present out of a feeling of hopelessness and uncertainty. Perhaps that same point was reflected by the exchange which passed between the hon. Members for Oldham, East (Mr. Lamond) and Hackney, South and Shore-ditch (Mr. Brown) and myself about who was to blame for the situation.
I think that the hon. Member for Walls-end is right when he says that although no general agreement will result from the debate—in fact, I suspect that there will be quite a good deal of agreement—at least we shall have highlighted the problems of financing local government.
I join with others in congratulating my hon. and gallant Friend the Member for Eye (Sir H. Harrison) for raising this subject. It is highly topical. It is concerned with the one matter above all others that presents the greatest worry and concern to all our constituents not just at this time of year but throughout the year. That is something which has changed over the past two or three years. It has changed as a result of the huge increases in rate demands, and it is important that we should continue to nag the Government about rates. They cannot be allowed to escape—I am not suggesting that they are trying to do so—temporarily behind the shelter of the Layfield Committee. I am certain that the Government and the Department of the Environment must be constantly considering the problems of local government finance.
The membership of the Layfield Committee is immensely experienced, immensely able and brilliant. However, there is still no guarantee that the members of the committee will provide solutions to all the problems that face us. Time and again in the past others have tried and failed. Way back when I first came into the House in April 1964 the late Richard Crossman, the then Shadow 1037 Minister with responsibility for local government, was talking about the tremendous reforms that he was going to introduce into the rating system. Very little happened afterwards. Each successive party in opposition has, through its shadow spokesmen, talked about reforms, but in reality little has been done, and certainly nothing fundamental. There is a continuing problem, and it is no use the Government pretending that Layfield necessarily will be able to produce the answers.
We have heard a good deal about what is wrong with the rating system. We have heard about the rate burden steadily increasing and the unfairness which is increasingly felt. That is particularly so now because rates are growing faster than incomes. Instead of the rates being a once-a-year grumble, it seems that they are constantly at the back of the minds of a huge number of our citizens. The Prime Minister never said a truer thing when he said that we pay our taxes in sorrow and our rates in anger.
The rating system has its advantages. It is cheap and simple to administer, and there is a known return. However, it has always been unfair. Few would disagree with that. It has now become unacceptably unfair, and for that reason the system must be changed. My right hon. Friend the Member for Crosby (Mr. Page) said that local government must slim. I do not disagree with that. Of course, the effort cannot be made by local government alone.
In my opinion, there are five reasons for local government expenditure increasing. First, there is inflation, followed by Government action and public demand for increased services. My last two reasons are to some extent criticisms of local government. There is the weakness of local government in the face of central Government action and in the face of public demand for services. There is also some waste and some unnecessary fringe expenditure.
In Wiltshire this year the proposed rate increase is 21.8 per cent. That figure includes a real increase in expenditure of 3.8 per cent. It is pretty remarkable, and it demonstrates how inflation is affecting the rates, that a 3.8 per cent. real increase nevertheless produces a 21.8 per cent. increase in the proposed rate. It 1038 is to the credit of my county that originally it was planning for a 7 per cent. real increase but has cut that back to 3.8 per cent.
Turning to Government action, again, in spite of the protestations of successive Governments, they have added and continued to add burdens to local government. I think it was my hon. Friend the Member for Hornsey (Mr. Rossi), in the last debate but one on this subject, who reminded us that we in this House, together with Whitehall, had added no fewer than 1,000 new responsibilities to the burdens of local government since 1947 and that most of those new responsibilities included some extra expenditure.
Recently the present Government have enacted the Housing Rents and Subsidies Act, and that will add to the cost of local government. We do not yet know what will be the consequences of the Government's proposals for the nationalisation of development land, but it will be immensely surprising if that action on the part of the Government does not add enormously to the burdens of either the ratepayer or the taxpayer.
The hon. Member for Wallsend was absolutely right when he pointed out that the public tend to try to eat their cake and have it. I give an example from my own county. Quite recently the county council decided to suspend the request services in public libraries. There was an immediate outcry from the library users. The consequence was that in the face of pressure the county council felt that it had to reverse its decision.
Again, one knows from one's letters, which arrive certainly weekly, if not daily, of the demands for increased expenditure which are made by one's constituents. This tends to stem from a belief—although it is a much less strongly held belief than used to be the case—that Governments, of one sort or another, have a bottomless pot of gold and that if one shouts loud enough and long enough someone in Government will extract a bit more from it, and that if he does not he is merely mean-minded. The public generally have to play a very important part if the size of local government expenditure is to be kept under control.
Nevertheless, having said that, I think that local government has shown some 1039 weakness over the years in the face of public demand and Government action. We have had much too much government by circular. Local government too often has allowed itself to be browbeaten by circulars which have originated from a variety of Government Departments, and local government has shown a lack of confidence and an inability to stand up for itself. If the central Government really want local authorities to do things, it is up to the central Government to legislate. Otherwise to a great extent—and perhaps as has sometimes been common in the past—it is very important that local authorities should exercise their own freedom and, whenever necessary, disagree with the central Government should they feel so inclined.
Local authorities are continually blamed for waste. I have no doubt that all of us in the House and every elected councillor could go through the expenditure of his local authority and discover some area in which there was marginal waste or where there were too many people employed. But, taking the size of local authorities into account and their overall expenditure, I believe that the amount of waste is very limited indeed.
The question is what to do. I agree with my right hon. Friend the Member for Crosby that the Chancellor of the Exchequer has a very important responsibility in this respect in the near future in his Budget. But I do not entirely agree with my right hon. Friend that we should transfer the cost of education and of the police and fire services to the central Government. I shall come on to his other point about loan charges because I think that there is something in what he said about that. But, in general, it is much more important in the short term, until we have some reform resulting from Layfield or the Government's own thinking, that the ratepayers should be helped directly, if that is necessary, or that the local authorities should be helped directly.
Of course, the authorities must keep their policies under constant review. That means not merely when they are considering their budget but all the year through. I think that councillors are sometimes guilty of forgetting that decisions made in principle early on in the financial year can often create the poten- 1040 tial for a considerable increase in expenditure at the next year's budget time.
We await Layfield. However, I am convinced of the need to abolish the domestic rate and of the need to provide some relief for small traders. The transfer of expenditure to Whitehall is not enough. I agree, of course—this really answers the point made by my right hon. Friend—that to do that would temporarily lower the rates. However, I am fearful that if responsibility for certain items is transferred and if, thus, the rates are reduced, in a few years, the pressure being what it is, the rates will be up as high as they were before the transfer took place. If one creates a gap, so to speak, in local government expenditure, human nature being what it is and Governments being what they are, in a short time that gap will be filled up yet again. Therefore, merely to transfer responsibility is not getting to the root of the problem.
I hope that the Government, whatever Layfield may be doing, are giving very serious consideration to two things. The first is the question of what I think is called LENT—the local element of national taxation. As has been said earlier today, one-third of public expenditure can be ascribed to local government. It seems to me, therefore, that there are great possibilities attached to the introduction of a local element of national taxation.
I used to believe very strongly that he who paid the piper called the tune, and that in consequence the greater the proportion of local government expenditure that was found from the Government the greater the control exercised by the Government over local authorities. I am veering away from that view. If local authorities are prepared and able to stand up for their own rights, if they are prepared to show more confidence than they have done on many occasions in the past, the source of money which they use is perhaps of rather less importance than I was originally inclined to think.
The second matter to which I hope the Government are giving serious consideration is that of financing the loan debt, and here I agree with my right hon. Friend the Member for Crosby. My hon. and gallant Friend the Member for Eye quoted the figure for the outstanding debt 1041 of local authorities in England and Wales at 31st March 1974 as being about £18,000 million, and it was estimated at 13th November that that figure would increase to £19,500 million by 31st March of this year.
According to my rough calculation, the interest payable on that debt is about 13 per cent. to 18 per cent. of the total of local government expenditure, and it seems to me that this could reasonably be transferred to the Government without the danger of local government losing more of its powers, because it refers to expenditure which has already been incurred.
§ Mr. Oakes
I am following with interest what the hon. Gentleman is saying, and I agree with many of the points that he is making, but if the Government were to pick up the bill for the loan debt would not that in itself be highly inflationary, by encouraging local authorities to proceed with capital schemes which would have to be paid for by the Government?
§ Mr. Morrison
It would be highly inflationary if it were not accompanied by a reduction in the rates. I am trying to find a means of reducing the rate burden. I appreciate, of course, that if the rate burden is reduced it will mean that the taxpayer will have to pay more, but we know that the tax system generally—dare I say it?—is a little fairer than the rating system. I make the point because it is one area in which there is a reasonable argument in favour of Whitehall taking over responsibility, although in general, as I explained earlier, I am not in favour of that being done.
A major reform of the system of financing local government cannot wait for much longer. The public will not put up with delay, and there must be a reform before this Parliament comes to an end. I make a forecast that there will be a reform. and that the Labour Party and the Labour Government will adopt Conservative policy as proposed at the last election and abolish the domestic rate. If they do that I shall welcome it and be glad also to welcome a sinner into the fold.
§ 12.55 p.m.
§ Mr. Gordon A. T. Bagier (Sunderland, South)
The debate up to now, at any 1042 rate, has been one in which both sides of the House have attempted seriously to find a solution to an emotive and important problem for local ratepayers. By the terms of his motion the hon. and gallant Member for Eye (Sir H. Harrison) has attempted to keep the debate on that plane, and I congratulate him on his speech.
A serious factor to be considered is that our electors get the idea that nobody gives a damn, that the continued increases in rates and taxes are things about which nobody gives a hoot, and that all the thick-headed people in charge, be they councillors or Members of this place, do not know what they are talking about or even how to start dealing with the problem.
Last year, when the initial huge increase in rates occurred, I had a public meeting in Sunderland. It was attended by the chairman of my general management committee, Councillor Harper. The meeting was called by the ratepayers' action group, led by some ex-Tory councillors who had flirted with the Liberals and then become ratepayers' representatives. It was a well-attended and interesting meeting. I wish that I could get a meeting of that size during a General Election campaign. I wish similar numbers would turn up for local council elections. The fact is, however, that only when they have a "beef" will people turn up in numbers, and that is what they did on this occasion.
Councillor Harper is a headmaster and a scholar. He produced a large, round clock to show how the rates were spent. There were sections for education, housing, administration, social services, and so on. He explained in detail how much money was spent on each service and asked people where they thought improvements could be made. Many members of ratepayers' organisations believe that councils are not trying. If people believe that rates ought to be cut, it is incumbent upon them to say where economies should be made.
A number of matters were raised at the meeting, such as the payment of expense allowances to councillors, the closing of the civic theatre because it costs a lot of money, and economies in the arts. If all of the proposed savings were lumped together the result would be a mere drop in the ocean compared with the total rate 1043 demand. It was significant that the suggestion was that such things as the arts, libraries and similar services should suffer. These are the very local government services which must not be allowed to suffer.
It is unfair that our much maligned councillors should be hit with this kind of criticism, and it is right that this House should debate the structure of local government finance. I go a long way with the right hon. Member for Crosby (Mr. Page). I worry because I find my self in agreement with him on various things he raises, and what he has said—
§ Mr. Bagier
I assure the right hon. Gentleman that there is no football match on tomorrow and that I am here because of a genuine and sincere interest in the rating problem.
Reverting to the clock at the meeting that I attended, it was obvious where the largest impact could be made on the rates. Education, police and fire brigade costs are part of local government finance, but if those items were taken away from local rates and made a demand on the Government one would have to consider where local democracy would come in.
I hope that Layfield is thinking in terms of taking out of local finance the large chunk that accounts for education, police and fire services. The salaries for these groups are negotiated nationally, but the bills land on the tables of local authorities. If this chunk could he removed from the rating bill and put on the national Exchequer it would have a considerable impact on the rate demand.
I hope the House will note that I am not attempting to make a case for how the cost should be reduced. People have to expect that as costs increase, because they demand more services, the increases have to be paid for. I accept, as I always have, that when rates reach the sort of level they are at now they become an extremely unfair, although easily-collected, method of taxation. They are unfair because of the basis of rating valuation, which takes no consideration of the income of the individual who has to pay but is based on the type of property he lives in.
1044 At this level, involving as it does nearly a third of the whole of public expenditure, we have to think in terms of redistributing the load. I go a long way with the right hon. Member for Crosby in wanting to shift a chunk of the cost from rates to the central Exchequer, and the best way to do that is to base the liability on income.
When there is turmoil and anger about rates it usually brushes off on to us. We are the last card in the pack, and our constituents write to us with their complaints and explain the genuine hardship which exists. However, in my mail bag I get letters which complain that the slum clearance programme is not proceeding fast enough, that more housing is needed, that better road traffic provisions are required, and that more money must be spent on social services, the sewers, schools, nurseries, environmental clean-up and the clean-up of rundown areas. All this costs money. Ratepayers and tax-payers must not write that sort of letter if they do not expect to have to pay for services. They must be practical when asking their public representatives to cut expenditure.
There is always a need for improvement in education of all types—secondary, nursery and infants'. Social services present an ever-growing burden. In my constituency I have a very serious problem, which stems from two causes. The first concerns the provision of police supervision for the juvenile crime which is taking place—this is a national phenomenon but it is a serious problem in my constituency. Juveniles of 13 or 14 attack old people and rob them of their savings. The young people appear before the courts and the courts refer them back to the care of local authority, but the local authority does not have the social services to deal with them. Some youngsters repeat the offences, and that creates additional problems for the police.
The second cause concerns policemen on the beat. There should be many more of them. I believe that the right hon. Member for Crosby said that this was a manpower problem. Most local services are manpower-intensive. Policemen are expensive. They are worth the money but for every policeman recruited there is the additional cost of training, uniform, salaries and so on. All this expenditure is necessary, however, if people want their 1045 streets policed, their homes looked after and the offenders cared for. It is necessary if they want problem children from problem homes looked after, because the cost must be passed on.
I hope that as a result of this debate, people will appreciate that we are worried about the problem and that local councillors are, by and large, genuinely sincere in attempting to do a first-class job. My local newspaper, the Sunderland Echo, carried a story on Monday 11th February under the headlineYear of austerity for Wearsiders.It tells how the pruning committee has cut expenditure by £2,823,845—the largest-ever pruning in the metropolitan district of Sunderland. So, one relatively small local authority has saved nearly £3 million, but even so rates will increase this year by 20 per cent. The increase is due to factors completely outside the control of the authority—such things as increased salaries, higher costs for school books, and so on. The authority has cut its staff by 270. Much of the staffing which was asked for under the reorganisation has been found to be unnecessary, and, fortunately some of the posts had not been filled.
I give my local authority full marks for a thorough job in this respect. It is making vehicles last an extra year. Twin-town visits to the Continent have been cut out. That is a pity, but such a scheme is a luxury, and in a year of austerity it has had to go. The authority has cut down on hospitality. It has asked all the councillors and committees to consider the question of conferences, and whether the cost of participation can be justified. Let us not for one moment suggest that local conferences, with all the subjects they cover, are not important, because they are. Local authorities cannot live and work and grow in isolation, and when their members meet at these conferences they usually find them extremely useful for the exchange of ideas from different parts of the country. The conferences are important, but this year my authority has decided that spending on them must be cut back considerably.
Costs will continue to increase, and it is incumbent upon the House to find some means of alleviating the increases. That is why I hope that my hon. Friend the 1046 Minister will say something about the Layfield Committee, and whether it will recommend changes along the lines I have suggested. I hope that my hon. Friend will be able to say that the Government will implement those changes as quickly as possible.
§ 1.7 p.m.
§ Mr. Stephen Ross (Isle of Wight)
I apologise to the hon. Member for Sunderland, South (Mr. Bagier) for having missed the early part of his speech. I shall have to leave fairly soon, and I apologise to the hon. and gallant Member for Eye (Sir H. Harrison) and the Minister since I shall not be here for later speeches. I have to be in my constituency by 6 o'clock this evening.
We are having yet another debate on rating. We seem to have had innumerable debates on the subject since I entered the House a year ago. Nevertheless, it is right that we should once more be airing the subject, because the crunch time is just about to descend upon us. We are entering a critical period, in which we shall see whether ratepayers will agree to pay the increased demands which will undoubtedly fall upon them. There is a real fear of revolt in some areas, and if what we say here today can play some part in alleviating those fears it will have been worth while.
We should be quite clear, however, that not all authorities are reporting substantial increases. The hon. Member for Sunderland South has just described how his own authority has made cuts, and I congratulate it very sincerely on that step. I was a member of an authority at the time of reorganisation, and I agree that to some extent the Bains Report, which was the gospel that authorities went by. was mistaken—certainly in the case of second-tier authorities—on the question of staffing. There are now chief executive officers, but one sees that it is the county secretary or the district secretary who is doing most of the work. There is therefore room for pruning. We are told that there are about 100,000 more staff in local administration than there were before reform.
§ Mr. W. E. Garrett
A colleague of mine had a reply from the Minister some weeks ago which stated that the figure was 154,000.
§ Mr. Ross
I am horrified that the number has increased by 50,000. The object of the reform was to make savings.
The local Conservative association in my constituency put a leaflet through my door the other day complaining that Westminster's rates are going up 50 per cent. No doubt they are right to complain.
I hate to make party political points, but it is a fact that in Liverpool the rate is going down by 2 per cent. That may be a great mistake—it has been suggested that it is a mistake to reduce rates. There happens to be a Liberal majority on the Liverpool City Council. Leeds had only a small increase. Mr. Joe Rogaly pinpointed in the Financial Times recently an important matter for all local authorities, which was that Liverpool set up a sub-committee known as the Performance Review Subcommittee. It has played a strong part in keeping the rates pegged, and in even achieving a small reduction of 1p.
My authority established a similar committee. It is difficult to compare like with like when one authority is going out and another is coming in, but those committees should have had time to play an important rôle in monitôring the finances of local authorities and the claims on their resources.
§ Mr. Ross
I gather that Liverpool had reserves of £5 million or £6 million. But all authorities draw on reserves. We have been drawing on them for a long time.
My constituency's rates are up by about 26 per cent. which is approaching the limit set by the Secretary of State. I know that the authority did everything it could to prune its costs.
I continually receive letters about concessionary fares. We have been able to allocate only £6,000. Constituents write to say that in London pensioners can travel free on the buses between 10 a.m. and 4 p.m., and after a certain time in the evening, whereas in the Isle of Wight they receive only four or five free tickets a year. The sum allocated is small, and we should dearly love to increase it substantially, but we have not been able to.
1048 There have been restrictions on our recreational facilities, and we have a shortage of firemen. Some people are demanding to know whether hotels and guest houses comply with fire precaution measures. The fire service cannot carry out the inspections, because it is short of manpower.
Our real attack should be on the regional water authorities. I have been hammering at them for some time because they have gone against Government advice and the advice of the committees that looked into them when they were set up. The board covering the southern area is equalising its charges in the coming financial year, when it was recommended that it should do it over a seven-year period. That is hitting particularly hard places such as my constituency, the Hove area, and Brighton.
Some hon. Members may have already appeared before the Layfield Committee. I am to appear before it on Tuesday. The more we seek alternatives to the present rating system, the more we see how difficult it is. Solutions must be simple and fair. They must relate to the ratepayers' ability to pay and must ensure continued and rather more local control.
Domestic rating has reached the end of the day. I agree with that part of the motion, but the motion does not say what to put in its place. The acceptability of domestic rating has largely been destroyed by the Rent Acts. Rating bears no resemblance to the open market rental value of private housing.
There is no easy solution. I should like to see the evidence of the Inland Revenue, because the replacement of the rating system will presumably be some form of taxation. I hope that it will be simple. I am all for one form-filling exercise a year. If the Inland Revenue will be required to re-distribute the money to local authorities, its evidence will be very important. We know that it faces new forms of tax, as it has over the past 10 years. There is capital transfer tax, for one, and there will probably be other things in the next Budget. I wish that we were not to have that Budget. I wish that we did not have to have a Budget every year.
If we are to give the Inland Revenue the task of redistributing from national 1049 or local taxation to local authorities, when and how will it be able to do it? What additional manpower will it need? I believe that the right hon. Member for Crosby (Mr. Page) suggested that it would be 1977 or 1978 before the Inland Revenue could deal with the matter. From discussions I have had with Mr. Layfield, I believe that his committee is doing a thorough job. It has been going all round the country. Its investigation will be far-reaching, and we must await the outcome.
I listened with great interest to the right hon. Member for Crosby, as I always do, because he is very knowledgeable on local government matters. He had the courtesy to come to my constituency after we had won our independence, when he said "You have your independence, but you have to pay for it." I keep reminding my ratepayers of that fact, but I have no doubt that they want to remain in an independent county.
The right hon. Gentleman offered four solutions, three of which I do not entirely agree with. I agree with the hon. Member for Devizes (Mr. Morrison). I do not want to put everything on to central Government. I do not want to see the fire and education services, for example, under central Government.
There is one important point about the local debt. I think that it totals about £20,000 million. About £8,000 million relating to rate fund services must be written off. I hope that the Chancellor will do that in his forthcoming Budget. It would be an enormous relief to local authorities.
The Chancellor must also consider domestic rate relief. Under great pressure, he introduced a measure of relief. Where rates had increased by more than 20 per cent., 60 per cent. of the increase was to be refunded. That relief will have to be extended into the next financial year, and extended to the smaller commercial premises. I do not want to go back over yesterday's debate, but someone should be able to find a mean gross value which would be a fair average for a small shopkeeper, possibly under £1,000 gross, and extend the domestic rate relief to such people.
Small villages, and some that are not so small, with populations of 2,000 to 3,000, are losing their general stores at 1050 an alarming rate. I have recently learnt of a village where the local Co-op has moved and the only remaining general store is to close down on 29th March. The people in that village of over 2,000 are now expected to travel three or four miles to the nearest shops, and they face increased fares on their buses.
I also ask the Secretary of State to use his powers to deal with the regional water authorities, which have sharply increased their charges for water and drainage, over which we have such little control.
I apologise to the Minister for the fact that I shall not be able to be here when he concludes the debate.
§ 1.19 p.m.
§ Mr. Mark Carlisle (Runcorn)
I am grateful to my hon. and gallant Friend for Eye (Sir H. Harrison) for raising a most important matter. I share the view expressed by the hon. Member for Walls-end (Mr. Garrett) about the sparse attendance. I have no doubt that the burden of rates on the average householder is one of the major matters of concern facing every family.
The hon. Member for Oldham, East (Mr. Lamond) wondered why people paid their taxes in sorrow but their rates with anger. The answer must be that so much of the money which one pays in taxation, one pays without really realising that one is paying it, whether it is the tax on a packet of cigarettes, VAT or even PAYE, which is deducted weekly. The rate demand arriving on the doormat, demanding payment in two global sums, is clearly identifiable and appears to hit much harder at the pockets of individual families.
I agree with those who have said that the ratepayers cannot eat their cake and have it, any more than any other section of society can. Clearly, services have to be paid for, and I do not believe that anybody would seriously argue for a great reduction in the standard of a local authority services. That they have to be paid for is self-evident. What is open to dispute is the method by which they are paid for and on whose back the burden for paying falls.
What I want to dwell on this afternoon is the severe situation to be faced again this year by the ratepayers in Cheshire, and I am grateful that the hon. Member for Widnes (Mr. Oakes), himself a 1051 Cheshire Member of Parliament, is to reply to the debate. As I have indicated to him, I have a constituency engagement that I have to attend this evening, and I apologise in advance if I have to leave for it before he replies to the debate.
I do not want to take up the time of the House by dwelling too much on the past, but the fact is that a substantial number of persons, if not the majority, certainly in my constituency in Cheshire, originally faced rate increases in excess of 70 per cent., many substantially in excess of 70 per cent. I do not have to remind the Minister that that created a virtual eruption, and it led to the setting up all over the country, particularly in the counties hardest hit, of ratepayers' action committees threatening among other things to refuse to pay a just rate demand.
In fairness, I do not believe that it was only an unwillingness to pay. It was often genuinely believed that there was an inability to pay. People were being asked at that time to keep any increase in their incomes down to 7 or 8 per cent., and yet they were faced with these massive increases in their rate demands.
At first the Government unwisely flatly refused to do anything about it. In what I accept to have been a wholly uncharacteristic attitude, the hon. Gentleman and his colleagues even went so far as to refuse, to my amazement, to meet a deputation of Cheshire MPs to put the case of our ratepayer constituents. But in the end, thanks to constant pressure from both sides of the House and local authorities and many millions of individual ratepayers, and aided by a defeat on an Opposition motion on the Floor of the House, the Government gave way and the Chancellor of the Exchequer introduced his special relief.
That special relief alone meant to domestic ratepayers in Cheshire an additional injection of £4.4 million. In the end, the average domestic ratepayer in Cheshsire paid some 17½ per cent. less than he would have paid had the original demand of well in excess of 70 per cent. been adhered to. One can therefore say that this was a victory that had been happily won. One would have thought that the Government would learn a lesson from the effect of an increase of this 1052 nature. Unhappily—and, of course, I speak subject entirely to what the Minister will say—to date they seem not to have learned that lesson.
What is the effect that my constituents and those of the Minister will face this year? The county rate precept in Cheshire is to go up by 29½ per cent. It will go up to 58p in the pound as against 44.74p last year. Two years ago the county precept was about 28p. This shows what an enormous increase there has been.
Yet this is occurring at a time of a completely no-growth budget. There are no new services and no improved services to be provided for that money. Indeed, I understand that there are to be some cuts in the standards of existing services.
The cause of that increase of 29½ per cent. has three ingredients—inflation, the increase in the size of the county population and the changes in the rate support grant. Inflation in the past 12 months has cost Cheshire £30.9 million. That is made up in part of a deficit of just under £5 million due to an underestimate of the rate of inflation in last year's budget. There is also £25.3 million to take account of the rate of inflation over the last 12 months. Adding a further sum of £24 million to allow for the likely rate of inflation over the current year, as the county has had to do, by the end of the year there will be some £54.9 million for the effects of inflation on the county budget. This means that, without increasing the services in any way, by the end of the year, as a result of rising prices, it will cost £3 to provide what was being provided for £2 two years ago.
I emphasise the statement by my right hon. Friend the Member for Crosby (Mr. Page) that one of the reasons for inflation hitting so severely at the rate demand is that county services are inevitably labour-intensive. I am told that 65 per cent. of the county rate in Cheshire goes in wages and salaries, to teachers, firemen, policemen and other employees. I accept that if there is a substantial increase in the salaries of those people, as there has been, particularly for teachers, inevitably there is a large increase in the rates, an increase over which the county has no control.
When one talks of the county councils being labour-intensive, one is talking of 1053 people such as schoolmasters rather than implying that the councils are administratively labour-intensive. Certainly all the staff in Cheshire council and the three district councils in my constituency are below establishment, and all are being extremely careful about the employment of administrative staff.
The first reason why the rates will hit us hard this year, certainly the Cheshire rate, is related to the general inflation. The second reason is the result of the increase in population, which inevitably means providing more services, which entails increased expenditure. The Minister knows of the growth taking place in a county such as Cheshire. To give one example, Runcorn New Town is a major cause of the influx of population in Cheshire. Over the coming year, as a result of movement into the county, there will be 2,000 additional schoolchildren to be educated and an additional 6,500 people for whom services will have to be provided. That increased population requires increased facilities. It cannot be denied that increased facilities inevitably mean increased costs.
The third and final cause of the increase in the county rate is the change in the Government rate support grant. I concede at once that Cheshire certainly does better this year with the needs element than it did last year. The fact remains that it is to be treated less well than the average county authority in that it will receive £3.75 million less than it would if it were to receive the average paid to counties. That is the picture at a time of continuing restraint. Despite efforts by the county council to keep the effects of inflation to the minimum, despite the fact that there is to be a no-growth budget, there will nevertheless be an increase of 29½ per cent. in the county precept, largely due to circumstances outside its control, circumstances which are the responsibility of the Government rather than the county council.
Bad as that is, it is only part of the picture. Important as the county rate is in the total rate, it is also necessary to take into account the effect of the district council rate. Here I take up the point of the hon. Member for the Isle of Wight (Mr. Ross) and remind the House of the remarkable achievement of the Conservative-controlled Warrington Borough 1054 Council. Not only has it announced no rate increase; it has actually put forward a decrease in next year's expenditure and in the rate which it will have to collect. That is an excellent example, by the largest council outside the municipal areas. It shows the effect a Conservative-controlled council can have in reducing the district or borough rate.
Despite the fact that for over half of my constituents the district rate will show a reduction the effect on the domestic ratepayer in the area will be far worse than the increase in the county rate implies. That is because of the Government's decision to remove, at one fell swoop, the special relief given in last year's Budget to domestic ratepapers, which amounted in Cheshire to an average saving of 17½ per cent. That decision means that the average ratepayer in Cheshire will have to pay 17½ per cent. more than he paid last year before he begins to account for the effect of the county increase.
I beg the Minister to think about this again. The Government had second thoughts last year and gave additional special relief which saved many ratepayers from tremendous financial difficulty. I ask the Minister to see whether something cannot be done of a similar nature this year. Since the county rate, if my arithmetic is right, amounts to two-thirds of the total rate demand received by the householder, it means that without any increase in the district rate the domestic ratepayer will have to pay 17½ per cent. more than he did last year as a result of the removal of the special relief, plus an additional 20 per cent. for the increase in the county rate. That means that without any increase in the district rate the average domestic ratepayer will need to raise, in cash terms at least, another 37½ per cent.
That is in addition to last year's increase, and represents an almost intolerable burden which can do nothing but stoke still further the process of inflationary wage settlements. What do I suggest that the Government can and should do, accepting as I do that services have to be paid for from somewhere and that it is unrealistic to expect to achieve greater savings than have already been achieved by local authorities, which, I realise, are conscious of the effects of rate demands?
1055 There are three things that should be done by the Government. First, they should not remove the special domestic rate relief. At the least they should phase it out over a period of years so as to cushion the blow. I would accept the argument of the Government if they were to say that they were not prepared to give the same degree of help as was given last year. To remove the special relief at one stroke is imposing an unreasonable burden. As my right hon. Friend the Member for Crosby said and as the Conservative Party generally made clear at the last election, we believe that the Government should at once place at least part of the rate burden on the Government.
The reason for this is that rates are basically a less fair form of taxation since they fall on only a portion of the population while providing services for all the population. They bear no relationship to an individual's ability to pay. The Government should do what the Conservative Party made clear it would have done and place the cost of teachers' salaries on the Government. I take the point that we cannot talk about local authority autonomy and at the same time ask for the whole of the cost to be borne by the Government. We could remove the cost of teachers' salaries from the rates without interfering with the present degree of local autonomy. In Cheshire, I estimate, that in itself would have saved the county budget—not the ratepayers, because I have to take into account the proportion paid by the Government under the general rate grant—about £27 million. Like my right hon. Friend, I ask the Government to look again at the cost of those other labour-intensive services, the police and the fire service.
The Government must urgently consider how to abolish the rating system and replace it with a fairer form of taxation. That must wait for Layfield, and I accept that there is no easy answer. There will be many complaints and criticisms of any other form of local taxation which takes it place—whether income tax or sales tax—but either the system is replaced with another form of tax or there must at least be a radical review of the system so as to take fairer account of a family's ability to pay.
1056 It may seem that the present Government have a fair amount of money to hand out. Earlier this week we debated the setting up of a referendum on our membership of the EEC, which will cost the hard-pressed taxpayer at least £8 million. That is completely wasted money. Those who live in the area that the Minister and I represent would feel that that money would be far better spent helping the hard-pressed ratepayer of Cheshire than on trying to get the Labour Party out of a political difficulty over the Common Market.
§ 1.42 p.m.
§ Mr. Julian Ridsdale (Harwich)
I should like, first, to congratulate my hon. and gallant Friend the Member for Eye (Sir H. Harrison) on having drawn attention to this problem. We in East Anglia seem to be able to do this fairly regularly. I moved similar motions in 1962, 1967 and 1972. This is because a considerable number of retired people in our rural districts have to face inflation at progressively increasing rates. When I first drew attention to this problem. in 1962, the rate of inflation was only 2 per cent. or 3 per cent. a year, yet the people were still affected. Imagine what the situation is today.
Although the rate rises in my area are only 17 per cent., compared with 50 per cent. in London and more in Cheshire, my constituents do not have the wage rates that are common in other areas, so their incomes are far more critically affected. That is why this is a sensitive area. At my advice bureau, last Friday, I had the largest number of visitors that I have had in 21 years, all complaining about inflation, about rises in the cost of fuel and fares, and about rates.
In my constituency, 10,000 people now draw rate rebate. I thank the Government for small mercies, but as I said to my own Government when I voted against them in 1973, that is not the right way to tackle the problem. Subsidies only encourage extravagance in local government, because those 10,000 people are contracted out of the system altogether. Subsidies mask the reality. Of course these people must be helped. That is why I helped to get the Allen Committee set up and the rate rebate system began.
The crux of the problem is fairness. The Minister used to talk in these terms 1057 from the Opposition Front Bench in those days. He asked whether it was right to have a prices and incomes policy while allowing vast increases in rates. What is far more unfair at present is that ratepayers whose incomes are falling, sometimes because of the act of the Chancellor, have to pay for vast increases in wages in education and local government. The Minister knows that increases of 30 per cent. are being made in this context. Any person with any humanity knows that this situation is not fair.
That is why many people are saying that, for ratepayers, the social contract is a social con-trick. Those are harsh words, but despair has affected these retired people—those who are just above the income range that receives rate rebates. Nor is it right that the Government gave relief last year and have not given the same relief this year. When will the Government help over sewerage and water rates, which hit so many ratepayers hard, particularly when the need is so much greater today?
I pressed Governments to act on this matter in 1962 and 1967. I pressed for finance to be considered by the Redcliffe-Maud Committee, and I pressed my own Government to do something. I agree with my right hon. Friend the Member for Crosby (Mr. Page), who has firsthand experience, that the nigger in the woodpile is not the Minister's Department but the refusal of the Treasury establishment, against whom he must fight a holding action, to realise that the system of local government finance must be altered.
The Treasury asks the Government to postpone reform, afraid of dealing with education and the police and other charges on the rates because, it is said, it might upset the equilibrium of national finance. The crux of the problem lies with the Treasury and the Chancellor. The Government have said that reform of local government finance should be postponed until the Layfield Committee reports, but they should realise the despair of ratepayers.
My long-term advice is in many Hansards. I am glad to say that the Opposition Front Bench reflects the initiative taken by the new Leader of the Opposition, who has realised that something must be done to take national 1058 charges off the rates. Something must be done immediately. We cannot allow this unfairness to continue. It leads to rebels, to revolution, and to despair. If the Chancellor wishes to do something fair, he should in his next Budget allow rates to be an expense chargeable against tax, until the Layfield Committee reports.
§ Mr. Albert Roberts
I agree that the rating system is archaic and unfair, but would it not have been better if the hon. Member's party, when in office, had dealt with rating reform before dealing with National Health Service and local government reorganisation?
§ Mr. Ridsdale
That is why I voted against my Government in 1973 and pressed the Labour Government between 1966 and 1970 to carry out their promise, made at the 1966 election, to take teachers' salaries off the rates. I do not wish to be party political. The faults are on both sides, because Ministers of both parties were unable to exert power over the Treasury. Treasury officials are to blame for not realising the full extent of the feelings about rates. Before the Lay-field Committee reports, why cannot the Government make rates a tax allowable expense, particularly when the rise is above 7 per cent. or so? We cannot, in all fairness, expect people whose incomes are going down to pay for the 30 per cent. to 50 per cent. wage increases. That is unfair government and bad government.
§ 1.50 p.m.
§ Mr. Norman Miscampbell (Blackpool, North)
This has been a valuable debate, and we thank my hon. and gallant Friend the Member for Eye (Sir H. Harwood) for giving us the opportunity, which has been taken by both sides of the House, to express the rising concern which is felt about rates by our constituents. That rising concern should not undermine the importance of the independence of local government. Whatever proposals are put forward must in the end leave us with genuinely independent local government. Undermining that principle would do far more damage than is already being done by the present undoubtedly unfair system of raising local revenue.
I want to utter a cautionary word about some of the proposals which have been made for wholesale reform, although I recognise immediately that inflation 1059 makes the rating system extremely burdensome. My constituency has been fortunate—perhaps in its local council—in that there has been only a 21 per cent. increase in rates this year. That is still a horrifying increase, particularly as it represents no more than 2 per cent. to 3 per cent. real increase in expenditure.
There are other difficulties about the rating system which should be recognised but which I will not rehearse because I am making a comparatively short intervention. There is, for example, the illustration which has been given of a widow paying the same rates as the earning family next door. That creates a feeling of unfairness which is justified.
Before we abandon the rating system, at least in part, for raising local government revenues we should review the alternatives with some caution. We should look with care, as no doubt the Layfield Committee will, at proposals for the wholesale transfer of local government expenditure to the shoulders of the central Government. If the cost of education, fire services and police services is transferred to the central Government, how much reality will there be in local autonomy? What is happening in Wales, Scotland and Northern England where the people express revulsion against Westminster is not confined only to those areas. There is a feeling throughout the country that more control must rest in local hands. Unless we recognise that feeling we may cause great damage to the body politic. People will feel unrepresented by a bureaucracy in London. The other side of that penny is that there must be local power to raise rates.
I do not praise the present rating system, although I take a more charitable view of it than some speakers have done. Before we throw away that system it is worth remembering that it has stood the test of time remarkably well during a period when inflation has not been so bad as it is now. It is probably true to say, if inflation continues at its present rate, that not only the rating system but democracy itself will be undermined. One can only hope that the rate of inflation will not be a permanent 20 per cent. That way lies disaster.
If inflation can be contained, the rating system has certain advantages. As I 1060 said, it has stood the test of time, and I understand that certain foreign Governments are interested in the way we raise local taxation. They feel that we have built up a system over the years which is worth looking at and emulating.
The system also has one or two other practical advantages. It is easily administered. The local authority works out how much it needs, and the rating basis, and simply divides one into the other and there is the rate. That is perhaps an over-simplification, but the system is easily administered. Evasion is difficult. The criticism that the system is regressive has been mitigated by the high proportion of rate relief that is given. I am sorry that I cannot give the House the exact proportion in Blackpool, but it is a high proportion and many of the worst hardships are being, mitigated.
The real anomaly about the rates is the pusillanimity of successive Governments who continually put off the quinquennial review. Nothing causes more distress than this lack of courage on the part of Governments, even the Conservative Government. It is suggested that the Labour Government intend to run away from that. I may be wrong. but I understand that the review is likely to be postponed. As inflation continues at its present rate, if there is no review the anomalies grow, so that when the change comes not after five years but after seven or 10 years the rate of increase is too heavy to be borne.
Most of our troubles in the past—not our present ones, which arise from a different set of circumstances—have arisen because Governments have put off revaluation. People become used to the valuation of their property and are concerned when the valuation is increased long after the date when the change was due, so that there is a sudden large change instead of a gradual change. I hope that the Government will change their mind and have the revaluation at its proper time.
I said that I take a rather more charitable view of the present situation than many speakers have done, but I have no doubt that there should be changes. The figures I gave a moment ago of the 21 per cent. increase in cash terms as against the 3 per cent. increase in real terms in expenditure in Blackpool indi- 1061 cate the necessity for a new think and a new look at what we are doing. The basic step that has to be taken—and the Under-Secretary of State has done this to some extent—is to tell local authorities that enough is enough, that we have come to the end of the line and local authorities have to restrain their expenditure. That may be difficult and may cause trouble within the local authorities and among the electorate, but we cannot have the continual improvement that we have rightly looked for until we manage to cure our economic problems. I am sure that that has to be done. We all know that, because we have all seen newspaper reports about what the Under-Secretary has been doing. I hope that it will be enforced.
Thus. I turn briefly to the possible alternatives, and I shall consider them in my order of least enthusiasm. None of them really provides an easy way out of the difficulties.
The first one is a local income tax. My right hon. Friend the Member for Crosby (Mr. Page) is an eager proponent of a local income tax. However, when one begins to look at the difficulties, they are seen to be neither few nor small.
How is it to be administered? The simple way is to administer it through the ordinary income tax and impose an additional tax on what is paid at the moment. But that is largely ludicrous, because local government might just as well get a handout from central funds in any event. I do not see how that helps us.
It could be a local income tax, but the administrative expenditure in raising it would not be inconsiderable. There would be all the problems, too, of those who live in one area and work in another. How, for example, are the hundreds of people who live in my constituency and work a considerable distance outside it to be traced? Perhaps the best possible example is those who work in central London and live in every constituency around it. The administrative costs of raising revenue locally cannot be dismissed as a matter of no consequence.
Overwhelmingly, the real difficulty is that no Government could allow local income tax to be put at any level. There would have to be a limit. Central Government finance and the imposition of central fund-raising, including the raising 1062 of income tax, would demand that there was at least some limit to what could be done in any local government area. I suspect that that limit would not be sufficiently high to raise all the rates. If that were to happen, the most likely result would be that local authorities would raise all that they could by local income tax and go up to the limit straight away, and thereafter we should be back to the rates assuming that it could not all be raised by means of a local income tax. That would not cure the situation. We should still have a rating system imposing rates over and above the local income tax.
The second possibility is a local sales tax, which I must confess is more attractive to a place like Blackpool than to many others. It has one disadvantage, however. Tradesmen in one area will not be very enthusiastic if they find that they have to charge a penny or two more than someone just across the road and may be undercut.
If that difficulty could be overcome—and it is not as great as that of a local income tax—for many places like my own constituency a sales tax would have certain advantages. Clearly, 8 million visitors a year can help the 200,000 population who live there during the rest of the year. But it is not quite as selfish as that, because it must not be forgotten that, at the end of the day, a constituency like my own has to provide the expenditure which makes it possible for 8 million people a year to visit it and for 500,000 people a year to live in it. It is not an inconsiderable amount on the rates, and it would not be wrong for them to make their contribution. A local sales tax has been suggested, and I hope that it will at least be looked at.
Perhaps at the end of the day the best hope is for some form of national contribution which would come from the suggestion which was made, and which I believe is not completely ignored by the present Government, of what I have always called a negative income tax or what is sometimes called a rebate system or tax credit system. That would be effective in enabling us to build into the national taxation system a scheme of allowances which would allow a proper adjustment to a person's ability to pay, with so much being allowed for his house, and so on. The money could be raised in that way.
1063 If there is to be a system of raising money by another form of taxation, this perhaps is the most equitable. It would be the most suitable, and it would adjust the burden to the shoulders which could best bear it. It seems to be the most hopeful. But, on the other side of the coin, it requires a complete change in our system of national taxation for it to be implemented.
The rate of change which occurs in local government finance and the way that it is raised would be no objection. It is likely that we shall have a radical rethink about national taxation long before we get round to changing the rating system. But there has to be some element of ability to pay. I accept that for one very good reason which has been mentioned by a number of hon. Members already.
The purchase of a house for retirement is a once-and-for-all operation in most cases. A person who said in 1960 "I bought a bungalow at the back of Blackpool when I retired from my little shop in Wigan, and I intended to have a happy retirement" cannot decide in the early 1970s to change to a smaller one because the rates have gone up. Such a person is locked in. A decision like that would have been made on the basis of a relatively stable pound, and the hardship is very real for a retired person in that situation. No one who represents an area like my own can fail to appreciate the real hardship which is experienced.
I hope that we shall find a system which will mitigate the burden of taxation so that it is more easily borne by those shoulders which can carry it. But in saying that, I return to what I said at the beginning. The system works at present. Before we get rid of it in its entirety and run after a number of other alternatives, I hope that the whole matter will be looked at with great care. Alternatives always look attractive from the Opposition benches, but they prove extremely difficult once they have to be justified from the Treasury Bench.
§ 2.19 p.m.
§ The Under-Secretary of State for the Environment (Mr. Gordon Oakes)
It is appropriate for me to intervene at this stage, especially since it enables me to take up some of the matters raised by the hon. and learned Member for Black- 1064 pool, North (Mr. Miscampbell) in what I thought was a well-considered, thoughtful and eloquent speech. We had tended to wander a little from the terms of the motion, but the hon. and learned Gentleman brought us back to them and to the real difficulties of carrying out at least the middle part of the motion.
On my count, this is our eighth debate about rates in one year and one week—in other words, since the Labour Government took office. There was a time when the right hon. Member for Crosby (Mr. Page) the hon. Member for Devizes (Mr. Morrison) the hon. Member for Harwich (Mr. Ridsdale) and myself would sit in a little coterie in this Chamber and use all the jargon—RSGs, domestic element, resources element—and the rest of the world would go home and we would continue to pursue the subject in those technical terms. That was the one debate we had on the subject in the year. However, there have been eight such debates in the last year.
Many have talked about special relief given by the Government since last July. and they have asked for a repetition of those reliefs this year. The hon. and learned Member for Runcorn (Mr. Carlisle) particularly stressed that point. Let us look for a few moments at the history of events in the last year. When Labour came to office in March of last year we faced a rate support grant which had been concocted—the only word for it—by the right hon. and learned Member for Hexham (Mr. Rippon), probably aided and abetted by the right hon. Member for Crosby, who is now so eloquent in his arguments against that very concoction.
That concoction gave various domestic relief ranging from 5p to some of the most needy areas in the country and over 40p to some of the least needy areas. It varied so blatantly politically that it was hardly credible that a Minister of the Crown had produced it. For example, outer London was assumed to stretch as far as the Isle of Wight. Outer Birmingham was given special relief, but inner Birmingham, where the problems were more serious, received only 5p ordinary domestic relief. That was the situation we faced when we came into office.
My right hon. Friend the Secretary of State for the Environment said "We 1065 shall try to alter the situation by evening out the figures to 13p in England." That was rough justice, and we admitted it at the time. Then, in the summer, my right hon. Friend the Chancellor of the Exchequer found £150 million to help ratepayers. This action was taken for a number of reasons. One lay in the motion passed by the House of Commons against the Government's wishes—a motion which the Government considered it was their duty to honour. The second reason was the severe plight we found in various parts of the country, but most of all within the local authorities who found themselves in great difficulty because they had been conned by the right hon. and learned Member for Hexham to believe that inflation would run at 8 or 9 per cent. and they had budgeted accordingly. The eventual figure came to 29 per cent or 30 per cent.
We had to deal with that situation, and we dealt with it by way of special relief and made it clear at the time that this was a one-off form of relief which could not be repeated. Having given that special relief, we then had the duty of carefully preparing a great improvement in the level of rate support grant. My ministerial colleagues and I discussed with local authorities as well as with local authority associations where the greatest need was to be found.
In February last year Conservative Members were astounded at the rate support grant produced by the Government. That grant gave £1,000 million to local authorities to help them over their difficulties because they found themselves in debt last year. The rate support grant was increased from 60½ per cent. to 66½ per cent. A total of more than £5,430 million is contributed by the Government to the figure of £8,000 million spent by local government. That is a vast sum of money. It was said that when the right hon. Member for Crosby was in office he said that the only way to deal with local authorities in respect of central grants was for him to go up in a helicopter and throw pound notes over the side to all the local authorities. The massive grant that we gave could almost be said to amount to that operation, and what we are now experiencing is a great deal of grumbling about the direction of the prevailing wind after we have thrown the money out of the helicopter.
1066 Local authorities and everybody else were impressed by the amount of money flowing from central to local government by way of improvement in the rate support grant. That was part of an agreement with the local authority associations. In other words, in consideration of that massive sum the local authorities were severely to restrain their expenditure.
To assist local authorities in the matter of restraint we issued our circular in December last year. Local authorities had their part to play, and the Government have played their part. When announcing that grant, my right hon. Friend the Secretary of State for the Environment said that despite that amount, because of inflation there was an expected increase in rates, on average, of 25 per cent.
The words "on average" are very important, but the situation has been misinterpreted by the Press and a number of authorities. An average is an average. It is not a guideline, or a target. We envisaged that many local authorities would experience an increase of less than that figure, and that is proving to be the case. In some authorities the figure is far less than 25 per cent. The constituency of the hon. and learned Member for Blackpool, North has done very well. It has obeyed Government policy, and the figure has come out at 21 per cent., admittedly with no improvement or increase in services. The figures in other authorities are lower than that. Leeds is one example, and I shall come to Liverpool a little later.
§ Mr. Ronald Brown
I was hoping that my hon. Friend would deal with the situation in London. I was also hoping to have had the opportunity to be called to speak before my hon. Friend, so that I could have given him my views on London.
§ Mr. Oakes
I did not see my hon. Friend in the Chamber. I thought I was the last person to speak on this side. I gave the opportunity to several Conservative Members to take part in the debate before I thought I should intervene. However, I shall be dealing with London in anticipation of my hon. Friend's speech.
Some Opposition Members asked for a repetition of the special relief given last July. We gave a massive increase, in terms of rate support grant, and also increased the domestic element from 13p to 18p in England and increased the 1067 figure in Wales to 36p because of the water situation. All that increase came from central Government. If we were now to reintroduce a special form of domestic relief on the lines of what happened last July, what would be the situation? First, we should have to make the relief annual, whether we liked it or not. If one pays a sum for two years running, one is almost obliged to take similar action in following years. It would become part of the rating system, and I believe that it would be regressive. Special domestic relief does not help the most needy. It helps across the board but it certainly does not assist the most needy.
Secondly, if local authorities were to believe that their rate were to increase by a certain amount and that they would receive a further 60 per cent., what power would the Chancellor or any of us have to ask for a degree of restraint in local authority spending? It would be a dangerous precedent if we were to reintroduce the special domestic relief on this occasion. Indeed, if we were to do that, the tendency would be that those who benefited last year would benefit again this year, not necessarily other people.
I know that all London Members are in difficulty over the average increase in London rates, which is far higher than the average for the country as a whole. We envisaged that the increase would indeed be far higher than for the country as a whole. One reason is that, whereas the rest of the country faced a massive percentage increase in rates last year, London had no such massive increase. In other words, it is facing two years of inflation in one. That is one reason why the London authorities are facing this difficult situation.
There are many anomalies regarding how the grant is given to and distributed in London. There are doubts about the arrangements between the outer London boroughs and the inner London boroughs. We must look at that matter. Indeed, my right hon. Friends the Secretary of State, the Minister for Planning and Local Government and I will be looking at the processes involved. I sympathise with and appreciate the difficulty of London ratepayers. I cannot offer any specific help by way of special domestic relief for London, and certainly not for the country, 1068 as a whole for the reasons that I have given.
My hon. Friends the Members for Oldham, East (Mr. Lamond), Wallsend, (Mr. Garrett) and Sunderland, South (Mr. Bagier) made the fair point that, although we sometimes get extravagances in local government, in general councillors do an extremely good job. Indeed, the hon. and learned Member for Runcorn made the same point about Cheshire—my authority. All authorities provide tremendous services for the public at minimum expense compared with providing those services in any other way. I think that tribute should be paid.
However, some authorities seem to stray from the harsh terms laid down in the circular, to which reference has been made, on what are called inescapable commitments. Some schemes have been mentioned. I do not propose to single out authorities for some of the schemes that I dislike. That is no part of my job. However, they themselves and ratepayers know about whom I am talking. An inescapable commitment is not something that is highly desirable but something which must be done. One example is paying existing staff, not the establishment. Authorities should rate not for establishments that they know they will never attain but only for the staff that they have. An increase for demographic reasons, because the population has increased, is an inescapable commitment. Highly desirable projects for an area are not inescapable commitments.
We are rightly asking local authorities, in the interests not only of ratepayers but of the country at large, to curtail their spending. One-third of the expenditure referred to in the White Paper is spent by local authorities. In the interests of Britain as a whole, we want to shift resources to get right the balance of payments, productive industry, and so on.
We all agree that there is an economic crisis. Local authorities have their part to play, not only this year, but in other years, by deferring highly desirable projects for some time hence. Their ratepayers and electors—they are elected bodies just as this House is an elected body—are as appreciative of national needs as we are. I am sure that they would be in full agreement with their councillors deferring many of the projects 1069 which may seem desirable but may not have popular appeal among electors.
§ Mr. Alan Clark (Plymouth, Sutton)
The hon. Gentleman spoke of the inescapable commitment to pay existing staff and then went on to talk about requiring authorities to reduce certain projects. Would it not be consistent also to get local authorities in some instances to reduce their staff? We are all familiar with instances where there is duplication and the possibility of redundancy.
§ Mr. Oakes
It does not work in that way. The staff of many local authorities in key areas is not up to establishment. Local authorities can redeploy their staff. Indeed, that is what we are asking them to do. We want local authorities to redeploy their staff not to increase it, on other projects which are required. In general, there is a staff shortage, as any glance at national newspapers will show—certainly in the more professional local government posts. I agree about redeployment. Indeed, the circular does not envisage in the constraints on staffing that there will be any reduction and redundancy thereby.
§ Mr. Townsend
I am impressed by words of caution coming from a Labour Minister. I appreciate that the hon. Gentleman does not wish to single out any particular local authority. However, we must face facts. I suggest that the hon. Gentleman's speech will not carry the weight that it would carry if he did not single out the GLC, which covers 32 London boroughs facing an 80 per cent. increase this year. Does not that call for the GLC being singled out?
§ Mr. Oakes
The GLC should not be singled out because of a large percentage increase in rates. The GLC had many critics in last night's debate, to which I listened. It has many difficulties, as London is the capital city. The fact that it has a high percentage increase does not necessarily mean that it is a spendthrift authority. By "singling out" I meant singling out pet, prestige projects. I shall not be drawn into a discussion on this matter, as other hon. Members wish to speak.
I do not disagree with the first and last parts of the motion. If the hon. and 1070 gallant Member for Eye had cut out the words,believes that steps should now be taken to phase out domestic rates and replace them by a more broadly based and fairer system; and, in the meantime",the motion would be acceptable to the Government. We could not agree to those words, because we have set up the Layfield Committee. Within months of taking office the Labour Government—in an area where, admittedly, to use the hon. and gallant Gentleman's words, nothing had been done by successive Governments for centuries—set up the Layfield Committee. That committee is independent and has to report this year. Having set up that special committee to report this year—the Secretary of State has promised that the report will be considered immediately by the Government because of the serious situation facing ratepayers—it would be foolish to embark on a scheme of our own, particularly a scheme like some of those mentioned today, in total disregard of the matters that are being considered by that independent committee.
Like my hon. Friend the Member for Normanton (Mr. Roberts), I am amazed when I hear hon. Gentlemen opposite talk about rates, and what ought to have been done. I have been a Minister for 12 months and one week. It is a matter of astonishment to me that the right hon. Member for Crosby (Mr. Page), who prescribed certain medical remedies for the local government system, was standing at this Dispatch Box only 13 months ago. What was he doing? The right hon. Gentleman was putting through this House the Local Government Bill 1974. What was that Bill about? It was about local government finance. Indeed, it followed a White Paper and a Green Paper on the rating system.
Right hon. and hon. Gentlemen opposite, 13 months ago—not 13 years ago—decided that the fairest way of local taxation was the rating system, with no alternative being put forward. It would have been preferable—as the right hon. Member for Crosby, to his credit, now accepts—no matter what the terms of reference of the Maud report were, to have set up a parallel report so that finance and local government reorganisation could be considered at the same time.
1071 That was the mess that we inherited. Therefore, we immediately set up an independent committee to find a viable alternative system to rating. It is difficult to find a fair alternative to this system, as the hon. and learned Member for Blackpool, North, clearly indicated.
There has been a lot of talk, starting from the election, by, of all people, the right hon. Member for Finchley (Mrs. Thatcher), now Leader of the Conservative Party, who was formerly, believe it or not, Secretary of State for Education and Science. Hon. Members on both sides of the House are rightly critical of the idea behind all that talk which was, "We will relieve the situation by taking away education, the police and fire services, and financing them centrally." They stay—perhaps this should be in inverted commas—under local government control. However, the finance would come from a central Department.
Let us consider two of the services that would be involved. I begin with education. We have in this country one of the finest and most democratic education systems in the world. It is democratic in the sense that the central Government cannot dictate to a teacher that he teaches a particular dogma or theory or else loses his job. That is a valuable right for both sides of the House. I find it astonishing that Conservative Members would be prepared to throw away that fundamental right for the possibility of central Government finance for teachers. Let us face it: he who pays the piper calls the tune. The persons paying the piper cannot call the tune under the present arrangement of different and separate education authorities.
It seems that Conservative Members would also centralise finance for the police. This is another highly sensitive area when we consider, for example, individual freedoms. I believe as an individual—I am not speaking on behalf of the Government—in some form of regionalism for the police force. The House heard my views during the passage of the Local Government Act. I deplored the decision to break up one of the finest police forces in the country—namely, the Lancashire force. I would be hesitant to have a national police force with every policeman being financed by central funds.
1072 Is that what the Opposition, and particularly the right hon. Lady the Leader of the Opposition, would throw away to appease some of the temporary demands of ratepayers to reduce part of the local authority rate burden?
§ Mr. Oakes
Indeed it is. That is what I have been saying. The Layfield Committee is considering the fair way in which to proceed. I am replying to the suggestion that we should act independently and act this year regardless of the Layfield Committee. The motion calls for immediate and instant measures and disregards the fact that the Committee has been set up. That is the centre part of the motion. The Government cannot accept the motion because of the existence of the Layfield Committee.
Other remedies have been suggested. I found the suggestion made by the right hon. Member for Crosby quite astonishing. Although many suggestions have been made, it is the right hon. Member for Crosby who has provided the alternative that is demanded by the hon. and gallant Member for Eye, that something be done immediately. The right hon. Gentleman says that action should be taken by the Chancellor in the Budget which is to be announced in a few weeks' time. The right hon. Gentleman suggests that the situation for many local authorities would be relieved if the Chancellor were to take over directly the financing of certain functions of local government.
I do not know whether the right hon. Gentleman was led on by his initials, but he engaged the House in a long medical metaphor. I recall that he was standing at this Dispatch Box 12 months ago as the GP for local government; he was then the doctor in charge of the patient. He has been saying today that the control of money for local government functions should go to the central Government. He is saying that control should pass to the Treasury and the Chancellor. It is surprising that the right hon. Gentleman, who stood at this Dispatch Box a comparatively short time ago as an environment Minister, should propose that the Treasury should control such matters. To continue with the right hon. Gentleman's medical metaphor, it seems that 1073 his cure, as a former GP for local government, is to cut off the patient's head, but temporarily, of course. That is the sort of remedy that has been brought before the House.
I have spoken for a little longer than I intended, but I shall proceed to deal with some of the other points that have been made. The hon. Member for Devizes (Mr. Morrison), in a well-reasoned speech, pointed out some of the difficulties behind taking away certain functions from local government. I know of the hon. Gentleman's deep interest in county council matters in particular. For many years we have discussed these matters together. I indicated in my intervention that I thought his proposal on loan debts was particularly dangerous. I consider that it would be dangerous for that central Government to undertake to deal with the loan charges of local authorities. I know that they are a great burden on local authorities and a great burden on the rates. Surely this is again a question of some form of financial restraint by the central Government. The hon. Gentleman's proposition would be most dangerous because it would be a temptation to some local authorities to say "We can have this capital scheme. It does not matter at all because the central Government will pay the interest rates." It would be an inducement to many local authorities to engage in capital schemes.
§ Mr. Charles Morrison
In reality, would it be an inducement to local authorities? Surely the majority of local authorities are directly controlled by the central Government as regards their capital expenditure.
§ Mr. Oakes
Yes, but even within the locally determined sector I have asked for restraint. From many local authorities I have received restraint. I think that restraint would be eroded if the hon. Gentleman's suggestion were pursued and if there were that form of central Government intervention. Again, that is a matter that the Layfield Committee should be considering. I have no doubt that it is considering such matters.
The complete pattern and picture is so complex that to take any one item in isolation, however attractive it may seem to an individual hon. Member, can lead us entirely up the wrong path. In helping the ratepayers we must consider carefully 1074 the concept of local authority autonomy for the reasons that I have given.
My hon. Friend the Member for Sunderland, South said that very often ratepayers behave as though nobody gave a damn. We know that they write to newspapers and to hon. Members in that way. As I have said, the House has debated rates eight times in 12 months. I thank hon. Members for what they have said about my tour of the local authorities. I have endeavoured to take the message direct to the local authorities, as did my predecessor, and not merely to sit in Marsham Street sending out circulars advising them what to do. I have gone direct to the authorities. I have tried to answer their questions and get home the message of restraint. We in the House do give a damn. We are considerably concerned about the present position of many authorities. We are especially concerned about London and the rate increases that the people will have to face this year.
I apologise to the hon. Member for the Isle of Wight (Mr. Ross) for missing the first part of his speech. I was out of the Chamber for less than 10 minutes. I believe that during the course of his speech the hon. Gentleman had the audacity to say that the rates were 2 per cent. down in Liverpool due to the fact that the city is Liberal-controlled. I wish I had been in the House when he made that suggestion. I could not have refrained from intervening. It is a most astonishing claim.
Has the hon. Gentleman forgotten the increase order that the House gave to Liverpool? Has he forgotten the massive increase that the city received in its needs element because it is an old, decaying city? Those matters have nothing to do with a Liberal-controlled authority. The rates have been kept down in Liverpool because of the measures that the Government have taken in the needs order that has been given to the city. Other authorities in Merseyside look with envious eyes on how much the city has received. The fact that the rate has decreased by 2 per cent. has nothing to do with the fact that temporarily Liverpool is in Liberal hands.
The hon. and learned Member for Runcorn referred to Cheshire. I have already dealt with the special relief that 1075 has been given to that area. It is true that last year Cheshire was badly affected. I shall let the hon. and learned Gentleman have the details. I do not think it is true to say that Cheshire is below the average in terms of the rate support grant that it has received this year. Indeed, I think that it is somewhat above the average. Its needs element has increased considerably, having benefited by the fact that, in the needs element formula, this year's formula was based not on estimates of expenditure which were three years old but on this year's expenditure, which is helpful in a fast expanding county. In such a county, the sums must be done on the right calculations. If the calculations are too old the ratepayers will lose out considerably. Therefore, they were helped by that.
They were also helped by the fact that this year the amount of domestic relief is 18p in the pound, and not 13p, for ratepayers in the Cheshire area. I am still not wholly satisfied that my own county does well. I suppose every hon. Member feels that, in his capacity as a Member or as Minister. The work that we did on rate support grant last year in making it a more finely tuned instrument and fairer is certainly not ended. For example, one of the things we are looking at is whether a proportion of the needs element should go to the district rather than the county. I see that the hon. and learned Gentleman nods. He will appreciate that where we have a county in which there are two new towns, Warrington and Runcorn, this is a very important feature for the areas concerned.
§ Mr. Oakes
Yes, but let us confine it to one county. This is an important matter for the finances of local authorities. I am not sure that we shall be doing this, but we are examining the possibility. It is a difficult matter. We are trying to attune the rate support grant better.
Many hon. Members have mentioned the number of people who find themselves unable to pay rates. There are some such who are unable to pay rates. Tribute has been paid to the rate rebate scheme. On the figures that we have just received for the first six months of the scheme there has been approval, over the country as a 1076 whole, of 89 per cent. of the applications. Of those who applied, 89 per cent. got a rebate in some form under the aegis of the rate rebate scheme. What I fear is that many people still may be entitled to a rebate—especially may be entitled with the increases this year—but have not applied for one. I urge every hon. Member, councillors, the media and everyone else to bring to the attention of those who genuinely cannot pay their rates, or who may find themselves in considerable financial difficulty because of the increases in rates, at least to put in an application for a rate rebate. Some of them may indeed be surprised. I am told that in the constituency of the hon. and learned Member for Blackpool, North over 10,000 rebates were granted and that the average amount was £36. That is a sizeable sum when dealing with rate increases. They are the sort of figures which would be parallel with other constituencies. I urge hon. Members whenever they meet, as they inevitably do, a person who is poor or in personally reduced circumstances at least to put to him the possibility of making an application for a rate rebate.
§ Mr. Ridsdale
Will the Minister say how many people are drawing rate rebate? I tabled a Question about this some time ago.
Not offhand. We may not have had the information available when the hon. Gentleman tabled his Question. However, it may be available now and, if so, I shall certainly have it sent to him.
Rate rebates are a way in which assistance can be given to the individual ratepayer on a much fairer basis than any reintroduction of special domestic relief.
The motion has been useful in that it has generated a debate once again about rates. It is fair for the House to keep nagging at the Government, because this is a matter that worries people. Nevertheless, the figures that we have show that last year, for example, the amount of a person's disposable resources that was spent in rates had remained at a consistent 2½ per cent. to 2¾ per cent.—something that it had remained at for very many years in the past. What people forget when they look at the massive increases in their rate bills is 1077 that if they look at their pockets and their income they will see that they, too, have risen considerably. If one looks at one as a percentage of the other, one finds that it is more constant than many people imagine.
Therefore, I ask that the House does not approve the motion. The Layfield Committee will be reporting this year. Its report will be far more valuable, coming from an independent body, in either modifying the existing rating system or suggesting an alternative that is fairer. It can do so in a sane, rational and considered way, and not a way panicked either by pressure groups and ratepayers' action groups or by political motives, as shown by the right hon. Lady the Leader of the Opposition during the last election. Let us on both sides of the House approach what is a serious problem in a sane and rational way.
§ 2.45 p.m.
§ Mr. Tony Durant (Reading, North)
I am grateful for the opportunity to speak in the debate. When I became a Member of the House just over a year ago, this was the subject I selected for my maiden speech. Perhaps the Minister will forgive me for being still on the same hobby horse, but I feel strongly about this matter.
I congratulate my hon. and gallant Friend the Member for Eye (Sir H. Harrison) on introducing this subject today. As the Minister said, it concerns people very greatly at present. It is no disgrace to the House that we have discussed this matter on eight occasions during the past year. After all, 30 per cent. of the gross national product is a lot of money, and it is right that we should discuss it. I go a long way with the Minister on the question of the rate support grant. We have practically got as far as we ought to go on that at present. Any more would let local government off the hook and would make local authorities, as the Minister rightly says, perhaps not so conscious of the need to save money as they ought to be. I accept that. However, in his circular, under Clause 6—I have mentioned this previously at Question Time—he was not strong enough on new capital schemes. It is a pious statement rather than a tough statement. This element of his circular needs strengthening. Capital expenditure starts a rolling expenditure, from which 1078 it is very difficult for local government to escape.
The Government are making much of the fact that the rate increases are only 25 per cent., on average, but if a ratepayer paid £100 in rates two years ago and last year had a 60 per cent. increase, making it £160, if he then gets a 25 per cent. increase in addition, within two years he is paying practically double in rates. I do not suggest that the Minister is being complacent, but we should watch the question of making it sound good because it is only 25 per cent. We must remember that it is 25 per cent. accumulated over a period.
The hon. Member for Wallsend (Mr. Garrett), who is not in the Chamber at present, raised the matter of small shops. This is a very serious matter, about which I feel very strongly. I represent a constituency which is only a small town but, on the other hand, is a much scattered town. Large areas need better communications, and we need our local shop on the corner—the one that sells sweets and newspapers. It is almost the social centre of its street. The owners of these shops are in tremendous difficulty. The number of these shops that are being shut at present is frightening. It is not worth their carrying on. I ask the Minister to consider the question of a rate rebate on mixed here-ditaments, such as the small shop where the owner lives above it, and to look at the percentage increase to help the situation. It would make a difference to the individual shopkeeper, and to the small corner shop, run, perhaps, by a pensioner or someone in like circumstances.
I agree with the Minister's figures about the percentage of rates to incomes being constant, and that rates are still within reasonable bounds. Unfortunately, what has happened is that the rates have been hitting particularly the old people and those on fixed incomes. This gives rise to deep feelings on this subject. It also affects young married couples who have clearly stretched themselves financially to get a home and who are in difficulties with their mortgages and now face these enormous rate rises. These are the categories of people who are feeling this matter deeply. When they see all this money going to the young and the old many young active people feel a slight resentment, perhaps because they do not yet have children, or 1079 have not yet become involved in sending their children to school, or do not need the social services. I do not think they decry that, but they feel that they are constantly paying out. This is an underlying resentment.
§ Mr. Ted Leadbitter (Hartlepool)
As my hon. Friend said, there have been a number of debates in the House on the problem of rates. Does the hon. Gentleman agree that it would be wise for local authorities to debate the problem of rates far more often and explain the developments that are taking place, so that people at local level know what is happening?
§ Mr. Durant
I am grateful to the hon. Gentleman for his intervention. I should like to raise that matter in a few moments.
§ Mr. Speaker
Order. I am not grateful for the intervention. I have about seven hon. Members to get into the debate before 4 o'clock, and I hope that hon. Members will proceed as quickly as they can.
§ Mr. Durant
I shall respect your views, Mr. Speaker, and move as quickly as I can, because I have been waiting for some time to take part in the debate and I should not like others who have also been waiting for some time to be disappointed.
I believe that the problem comes back to one of capital expenditure. This has been one of the major worries of local government for many years. My local authority, with a population of approximately 150,000, is £64 million in debt. This is a serious problem for the local authority to deal with, and it has to borrow money at high rates of interest.
We have discussed extravagance. I accept the point that most local authorities are doing their best to keep down costs, but expensive buildings are still being put up by some of them. These buildings could be put aside for another five years and the authorities could manage in their old offices. I work in a small company, and we have to manage in the existing circumstances because of the present financial situation. This is something which local authorities ought to consider.
1080 They ought to consider, too, the land which they own but do not realise they own. When I was on a local authority, I started a campaign to get a list of all the land that we owned. It took three years, but at the end we were able to sell some of it and put up the things that we wanted with the money obtained in that way. The result was that there was no capital debt. I should like to see a land register in the local town hall or library, so that people can see what the council owns. This would be a reasonable way of ensuring the control to which hon. Members have referred.
This House has a lot to answer for in the problems of local government. We keep passing legislation, with great satisfaction. We look back and purr, and out go the regulations to local authorities, who have to do the work. They are dumped with these enormous costs, which are our fault. I shall not debate whether it is the fault of local government reorganisation, the Housing Rents and Subsidies Act, and so on, but this kind of legislation creates problems for local government. The Government ought to think again about introducing the Land Bill, because this will be another problem for local government. Local auhoritties will have to take on more staff and spend more money to purchase land.
I hope the House will permit me to make one small point of a parochial nature. I deplore the fact that the GLC is beginning to look outside London and is starting to buy up land for houses. I do not disagree that the GLC has a problem, but it is offering higher prices than local authorities can afford to pay, and this is a trend to be deplored.
We have talked about the shift of education costs. I do not believe in the Government's intervening so often in local government reorganisation schemes. As the chairman of an education committee I was involved in resisting the Government over reorganisation schemes. I assure the House that I did not get away with it. That is a fact of life.
We ought to consider whether to make a charge for planning applications. The sum involved would be small, but it would help towards the administrative costs. In most authorities, particularly in the south, a large number of planning 1081 applications are received. In a committee on which I served we were dealing with 300 applications every fortnight. The money raised would pay for the administration of the service.
The Lotteries Bill is now going through the House, and we hope that it will help in some way. But it will not help in a big way.
I agree with what my hon. and learned Friend the Member for Blackpool, North (Mr. Miscampbell) said about revaluation. I think that it is foolish to put off revaluation if we are to keep any sort of rating system. Like it or not, because the alternatives are so difficult, I think that we shall probably always have some form of local rating, and therefore we must have regular revaluation. We need the experience, and we need to keep the thing fair and equitable.
We have to face the fact that there is a revolt amongst ratepayers. Some ratepayers' associations are responsible and reasonable, but some are revolutionary. We must take account of those which are doing reasonably well, and I compliment them on their work in examining what the town halls are doing, but some associations are irresponsible. One has to judge them in the way in which they approach the matter.
We in this House should stop talking about whose fault it is. There is too much of one party saying it is the fault of the other and the reply being that it has been done because of something that the other side did before. The speech of the hon. Member for Wallsend reflected a great deal of the anxiety in the North, and it is important to get the Layfield Committee moving on its report. I know that it must get the right evidence, but it is extraordinary how some subjects can be reported on quickly, while it takes a long time to get a report on others.
I hope that the matter will be dealt with quickly, efficiently and justly, and that we shall not have the Secretary of State announcing at the Dispatch Box that a local council has gone into liquidation.
§ 2.58 p.m.
§ Mr. Albert Roberts (Normanton)
My hon. Friend said that this matter had been debated in the House many times and insults had been hurled across the Floor of the House to try to prove who 1082 was responsible for the present state of affairs. We know that rates and taxes are burdensome and that no one likes to pay them.
There have been many speeches today, and many criticisms of the system, but no one has come up with the real answer, because the fact is that if one wants the goods one has to pay for them. That is the simple fact which we have to appreciate.
The knowledge of the right hon. Member for Crosby (Mr. Page) on local government matters is far greater than mine. He spoke about taking certain services out of the hands of local authorities and passing them to the Government. Not long ago we were talking about a greater devolution of powers. Some hon. Members want more power to be in the hands of local authorities. In the last 25 to 30 years hospitals, gas, electricity, water and sewerage have been taken away from local government. If we take more away from them the local authority representatives will wonder whether their jobs are worth while. They want a job to do, and there are now complaints about the two-tier system. The large all-purpose authority is, they say, quite sufficient. Criticism in my county is rife at the present time.
I listened to the suggestion about local income tax. The idea is all right as far as it goes. I know that my hon. Friend the Member for Wallsend (Mr. Garrett) referred to the widow having to pay as much in rates for her house as is paid on the house next door, where there may be five or six people at work. In itself the present system is therefore to some extent unfair. There is no doubt that it is archaic, but can anyone come up with the complete answer to the problem? Teachers are now threatening to go on strike because of education cuts. We want to push ahead with our old programme and develop our social services still further, but if we want these services we have to pay for them.
In my area the local authority has agreed to give free television licences to retired people. This is bound to put an additional burden upon the rates. We must appreciate, too, that central Government are paying a tremendous amount of money—over £5,000 million out of £8,000 million—towards local authority 1083 costs. I suppose that we tend to say that if there is a flush of money into local government coffers the local authority will find some way of spending it. The trouble is in deciding where the cuts will fall. I am always willing to meet ratepayers. In the last few months they have been forming associations and becoming militant. They invited me to a meeting at which I asked them what services they would cut. I asked whether they would weaken the social services or take away the retired pensioners' free television licence. I asked them for some idea of what they would do. I said that if they could put their finger on true extravagance I wanted to know about it.
As the Minister said, in 99 cases out of 100 our local authority representatives are striving to do a good job. Of course, there may be a little bit of empire building here and there, but that is human nature. That was why we were initially against local government reorganisation and the way in which it was done. However, the last Conservative Government were adamant on this score. I made a speech about the matter at the time. As a result of the change, my area suffered, but that is now a fact of life—it is water under the bridge.
The factual speech by the Minister showed just what had been done by central Government. After we get the Layfield Report in the next few weeks there may be fundamental changes. I hope that there are. One of the canons of taxation and rates must be equity, and I do not believe that equity exists in rates at the present time. There has been reference to the terrific burden which is falling on some areas around London. Who believes that this problem will be solved easily? Everyone agrees that the burden of rates and taxation exists, but the money has still to be found. It has to come either out of our pockets or out of industry. The answer lies in spreading the load evenly throughout the United Kingdom.
We are trying to find a system that is equitable, and I hope that we succeed. We can all join forces here. We should stop carping and criticising each other. I hope that we can find an answer which will provide equity. It will not give complete satisfaction, but at least it may allay some of our anxieties.
§ 3.5 p.m.
§ Mr. Keith Speed (Ashford)
I congratulate my hon. and gallant Friend the Member for Eye (Sir H. Harrison) on initiating an extremely interesting and constructive debate. Some first-class suggestions have come from both sides of the House, as well as expressions of concern.
The debate is extremely timely, because many millions of our fellow citizens will soon be receiving rate demands that will carry them beyond the threshold of pain and tolerance. There is little prospect of any further relief until the Layfield Committee has reported, the Government have taken a view of its report, and legislation has been enacted. This is regrettable.
The Under-Secretary, whom I admire, respect and like, underestimates the strong feelings throughout the country about this second round of massive rate increases this year. He showed less than his usual standard of intellectual honesty when he criticised the Conservatives on overall matters of education and argued that education was still totally locally controlled and independent. My hon. Friend the Member for Reading, North (Mr. Durant) pointed out that the Secretary of State for Education and Science is waving the big stick at local authorities which do not conform with the Government's ideas of comprehensive education, and that he is in the process of phasing out the direct grant schools, which many local authorities have supported for many years and believe in passionately. Therefore, I do not believe that what the hon. Gentleman said carries the weight which he thought it did.
There is also a danger in saying "Let's wait until Layfield has reported", because we do not know what the Layfield Committee will report. The hon. Gentleman cannot commit himself to accepting the report, any more than I can commit my party. There will have to be consultations with local authorities and other people over a considerable period before legislation can be enacted.
The Government and, indeed, all hon. Members have to take a view. Either we believe in some kind of domestic rating system or we do not. Certainly we have taken the view, for reasons which I shall elaborate later, that the domestic rating 1085 system should be phased out and replaced by other forms of revenue. It is important to realise what has been happening over the past few years. The Green Paper of the last Conservative administration, published only three or four years ago, forecast that the gap between local revenue and expenditure could be met over the decade after reorganisation—in other words, right up to 1985—by increasing overall the Government grant percentage of about 60 per cent. in 1971 to 66 per cent in 1985. Because of the inflationary situaiton, and no doubt for other reasons, already the central Government are paying 66½ per cent. this year, yet at the same time rates are soaring to unprecedented levels. This means that we have lost the 10 years already; the period has been concertinad.
Another point raised by many hon. Members is the important fact that local government is labour-intensive. About 60 per cent. of all local government expenditure is on wages and salaries. Whatever we may feel about the social contract—no doubt the Under-Secretary and I will disagree about the interpretation of that—the fact remains that wage and salary inflation such as we have at present builds up trouble for the country generally, and for local government in particular, because it is so labour-intensive. This is a matter that should concern us all.
My right hon. Friend the Member for Crosby (Mr. Page) and other hon. Members have their doubts and concerns about staffing levels in local government, which I share. The Greater London Council's experience was argued last night and again today. When the GLC was under Conservative control the numbers of staff were reduced over a period. Since it has been under Labour control the numbers have increased, yet some of the functions of the GLC have been taken away from it.
§ Mr. Ronald Brown
The hon. Gentleman is quite right. The Conservatives reduced the staff, but they also drastically reduced the services.
is the point to which I am corning, because it has been running throughout the debate. A sense of realism has been apparent on both sides of the House, with the recognition that 1086 to reduce expenditure one must make cuts. If that message alone went out from the House, from the Minister and myself and most other hon. Members who have spoken today, and were received in town halls and county halls throughout the country, the debate would be well worth while.
I do not believe that there is any natural law that says that the staffs of local authorities should be increased year by year. In my Shadow post concerned with local government, I have formed the very strong view that there are no bad officers but only bad councillors, because it is the councillors who determine the policy and establish the resources to implement that policy, just as Ministers establish policy and civil servants implement it. Those councillors who criticise swollen staffs, and occasionally we hear councillors saying how terrible it is to have large staffs, are among those who have allowed the situation to get out of control, and I hope that they can get it back under control as quickly as possible.
It is undoubtedly a fact that we in this country have a tremendous capacity to want to eat our cake and have it at the same time, and the general public must realise when they are concerned about rates or taxation or Government expenditure that it is intellectually dishonest and not very wise always to press for bigger and better services while making that complaint. At times when our gross national product may be growing by 5 or 6 per cent., we can do much more in the services that we are discussing. But when our gross national product is probably declining, for reasons that the House knows and appreciates, there should be a golden rule displayed in all local authority offices and town halls to say "That which is not essential we shall do without". That seems to be what is said in Circular 171/74.
Another point made by both sides of the House has been that Parliament and the Government have a responsibility not to heap more and more duties and more and more financial obligations on local authorities. It may have been all right at one time, and, frankly, all parties have been guilty of it. When rates were growing at only 4, 5 or 6 per cent. a year, it did not very much matter, but now that rates are increasing by 20, 30, 40 or even 1087 50 per cent. a year, and more, it is important that, as the motion says, there should be a moratorium.
In its evidence to the Layfield Committee the Association of County Councils said:Central government, by the actions of individual Departments, alters and varies local government activities by legislation, exhortations and departmental pressures. In practice there appears to be little corporate approach.That creates some of the difficulty. It is not only the Department of the Environment that is involved. Departments such as the Department of Prices and Consumer Protection and the Department of Education and Science are constantly hurling circulars, regulations and orders of one kind or another at councils, and local authorities just cannot cope with them, for they do not have the staff. My own Kent County Council has written to the hon. Gentleman's right hon. Friend the Secretary of State for Prices and Consumer Protection to say "If you wish us to carry out these things, would you kindly send us a cheque for £250,000 and we will do so?" If more of that were done, Governments of all persuasions might take the lesson to heart.
I should like to comment on one or two items in Circular 171/74. Paragraph 8 has already been mentioned. It says:local authorities should provide for no expansion in … total staff numbers. …".Many people, including my right hon. Friend the Member for Crosby are concerned about control and whether we know what is going on. He believes, and he may be right, that we have to take tougher measures.
Paragraph 23 says:The rapidly increasing levels of expenditure make it desirable to review underlying policies".This is a reference to transport.The evidence suggests low fares have relatively little effect on attracting passengers from car to bus; nor are they an entirely effective means of helping the worse-off sections of the community.I say "Amen" to that, and certainly the GLC has not taken that lesson to heart. I believe that it is wrong for London's ratepayers to subsidise extensive Japanese, American, German or Dutch tourists travelling around our capital city, and I am sorry that appropriate steps in 1088 that respect were not taken some time ago.
The Minister will remember from election addresses of a year or two ago—and I am thinking of the West Midlands —that it was argued that eventually a Labour metropolitan county council would establish free local transport. This is a gross misuse of resources and does not help the ratepaper or transportation. If the Government believe this, I hope they will get this message through to their political colleagues, particularly those in some of the metropolitan county councils.
Paragraph 40 of the circular says:For example, delays in dealing with planning work may continue although priority should be given to planning applications for housing; land acquisition for planning purposes may have to be deferred; … The Government accept that the local authorities may not be able to increase their planning staff any further".That is so, because these are highly-qualified, highly-paid people. As my hon. Friend the Member for Reading, North said, this is a potent and cogent reason for looking again at the Land Nationalisation Bill, which we are expecting shortly. This is bound to have staffing and financial implications.
The basic problem that has been evident throughout the debate has been shown to be the system of rating. Even those who support the domestic rating system, and no one supported it with total enthusiasm, seemed to believe that there are a number of basic reasons for it being phased out over a period of time. I stress that. I do not believe that my hon. and gallant Friend the Member for Eye is asking that this reform of the rating system should happen tomorrow or next week. It will take time. We ought to begin our preparations now.
The basic problems are, first, that rates are unfair in that they bear little relationship to the ability to pay. Second, many who have the right to vote for councillors and who use local authority services do not pay rates. This cannot be right. Some of the people who may be writing to us and asking why they cannot have that new swimming bath or the extension to the local school or whatever are not householders and do not pay rates.
On the other side of the coin many small businesses which are bearing 1089 heavy rates do not have a vote. We have taxation without representation, which 200 years ago started a civil war. Judging from some of the letters I am receiving from shopkeepers and owners of small businesses, we may have another civil war in 1975 unless something is done.
Many hon. Members have referred to the problems faced by the owners of small businesses and shops. There is a special problem in rural areas. I hope that the Minister realises this. The smaller shops provide essential services in those areas. On the whole their profit is marginal. Often these businesses are run by retired people, former members of the police, the Civil Service or the fire brigade, whose pension keeps them going. There is no doubt that they are providing a service to the community. With the additional burden of taxation, social security charges and the rates, they could be moving into a loss-making situation. Certainly the profit is marginal. The rating problem affects cash flow, too.
I will not go through all the arguments about what should be done. Various hon. Members have mentioned the problems raised by mixed hereditaments and by the 1967 Act. There is a solution, embodied in the Private Member's Bill which my hon. Friend the Member for Norfolk, South (Mr. MacGregor) will be bringing forward next month. We can discuss the matter in more detail then. Of one thing I am certain. Action has to be taken, particularly to help the small business men who are facing a difficult situation.
For these reasons we say that domestic rates have gone beyond the reasonable ability of people to pay them. They are now increasingly regarded as being unfair. As my right hon. Friend the Member for Crosby has said, we may be facing more rate strikes as the year goes on. I hope that that will not happen. One way of ensuring that it does not happen would be for the Government to realise that there is work to be done here. I accept the essential premise that domestic rates should be phased out over a period of time. In the view of myself and my hon. Friends they should be replaced by a more broad-based and fairer set of taxes with a strong local element. I accept what I think was behind the Minister's remarks, that we do not want the whole thing to become 1090 a national burden, controlled by the Government. There must be local discretion and an element of local accountability.
For all these reasons, we believe that domestic rates will become increasingly intolerable to the vast majority of our present citzens, and that, if they go on progressing at the present rate, in another two or three years for many households they will be a greater burden than the mortgage payments. This is a statistical fact which I hope worries us all.
I therefore congratulate my hon. and gallant Friend again, and I hope that the House will endorse his motion in its entirety, because this is the one thing which will give hope to millions of our fellow citizens.
§ Several Hon. Membersrose—
§ Mr. Deputy Speaker (Mr. Oscar Murton)
Before I call the next speaker, I should like to draw the attention of the House to the fact that there is only 40 minutes left and there are approximately four hon. Members wanting to speak. It is in hon. Members' own hands, but brief speeches of not more than 10 minutes would be acceptable.
§ 3.21 p.m.
§ Mr. Ronald Brown (Hackney, South and Shoreditch)
Every time that request is made, I seem to be the next speaker. I am spending my time making 10-minute speeches and not getting my fair share, but I shall try to meet that request.
I want to put on record, again, our complaint about London. The Minister invited me last night to do so, and I regret that I could not get in before he made his speech. I intervened in the speech of the hon. Member for Ashford (Mr. Speed) to say that the GLC under Conservative rule reduced staff but also reduced services drastically, about which there was considerable complaint. Those services had to be picked up by the boroughs. The hon. Member's party was quick to complain about the services, but did not help to get people to accept his present premise, that people should accept reduced services if they do not want to pay the price.
I regret the continual talk by Conservative Members about rates strikes. They complain bitterly about industrial strikes, which they say are awful even to think of. They now adopt the cunning device of 1091 talking continually about a possibility—which of course, they hope will not come about—of rates strikes. This is an unpleasant way of trying to stir people into illegal action while at the same time maximising political spin-off. I hope that members of the Conservative Party will understand that they are not being as subtle as they think. It is coming through clearly what they are up to, and it does them no credit. One can understand the argument, but they need not descend to these depths for political advantage.
Our colleagues from the provinces might take a dim view of this statement, but London is a special case. With one-seventh of the population, we have many more problems than that proportion suggests. In January this year, we told the Minister that we forecast rate increases this year of 55 per cent to 56 per cent. I do not think that he thought that that was right. Ministers always think that those who make such forecasts are crying wolf. When the right hon. Member for Crosby (Mr. Page) was a Minister, he said, so often, "Your fears are unfounded." When we were proved right, he stopped saying it.
Since my hon. Friend is probably also being told that these fears are unfounded, it is valuable to see how accurate they have proved. The recommended as well as the actual figures show an average rise, this year, of 45 per cent., so we were not so far out. The lowest increase for domestic ratepayers in any borough will be about 28 per cent. In another borough the increase appears to be about 62.5 per cent. One borough is just below the 62.5 per cent. only because it charged a supplementary rate in 1974–75.If that borough had not done so the increase might have been the same or perhaps more.
London's domestic rate increase will be far in excess of the 25 per cent. target. It will be about double. Those significant figures should be taken into account. Not only are Londoners paying double the target for the country but their rates are already much higher than in the test of the country. According to the Institute of Treasurers, the London average is £95, whereas the average for the rest of the country is £75. Not only is the target figure higher in percentage terms; the 1092 percentages are applied on a much higher base rate, so the total effect is greater.
The Government said, and my hon. Friend repeated, that the 25 per cent. target was an average for the country. Originally it was expected that the London figure would be higher. My hon. Friend added that Government expected that the London figure would be very much higher, but that is not what we were told. Did the Government expect London rates to rise by double the target figure on an already higher base rate? That was not the view originally expressed.
London has a high expenditure, and it is easy to say that the local authorities are profligate, and waste money. I have spent 25 years of my life as an elected member of a local authority and my experience is that there are good, bad and indifferent local authorities. None of my colleagues, of all political persuasions, was malicious or malevolent in trying to spend money just for the sake of spending it. As chairman of the finance committee I have had to argue with them about cutting down expenditure. No authorities spend money as if it did not matter. London's high expenditure is due not to extravagance but to higher costs.
Those higher costs can be identified. They are primarily the higher pay and the higher price levels in London. London weighting is a good example of one on-cost that no other authority has to bear. Land costs more in London, and there is a greater demand on the services because of London's special problems.
The right hon. Member for Crosby said that he would exempt the social services from any cuts. I intervened to draw attention to the London borough of Hackney, in my constituency, which last year had to spend £7½ million on social services. This year's budget is nearly £9¾ million. The population of that borough is 250,000 yet it is necessary to spend £9¾ million on social services. The ratepayers in my area are mostly in the lower quartile of the income groups. The burden is therefore placed on the people who cannot afford to pay. The people with problems have to pay for their problems. The right hon. Gentleman's comment that he would exempt the social services from cuts is a rhetorical statement that means nothing. The rates in 1093 my area will still rise because somebody has to pay.
The extra cost, based on 1974 prices, will amount to £400 million. That figure reflects the difference between the situations in London and the rest of the country. The Department of the Environment has identified a figure of £325 million in regard to specific factors and services. Since those figures are accurate and have not just been plucked out of the air it can be seen that London receives much less grant proportionally than the rest of the country.
Government Ministers—I know that my hon. Friend the Minister works very hard on these matters—argue that London has higher rateable resources. That may be true, but it means that 20 out of the 33 London boroughs receive no resources grant at all.
Furthermore although there is a vast problem in London, our expenditure, in London is excluded from the needs element analysis. Consequently, compared with the rest of the country London ratepayers are substantially overburdened. Yet in carrying out this exercise the Minister knows that he is deliberately ensuring that the situation in London will get worse each year. It is not in line with his idea that if one gives people a certain sum one year they will expect it in later years. London is not only not receiving something every year; it is losing every year—and that burden is becoming greater.
It is true that the London factor in the needs element formula helps, and we are grateful for the temporary relief given by my hon. Friend the Minister. I appreciate that when that relief was announced it was thought that I would not be happy with it. I am smiling only a little. The figure went from 8 per cent. to 12 per cent., and I am always grateful for small mercies. What staggers me is that I understand the Minister is to put back the figure to 8 per cent. for 1975–76. I am astonished that my hon. Friend should treat the great conurbation of London, with all the problems facing its residents, in such a way. If that figure is correct, I hope that he will look again at the situation.
I urge the Minister to meet my London colleagues and myself to discuss these 1094 matters in depth. If necessary, we can bring with us local government representatives to substantiate the case. This is a big problem in London, and no longer can we be fobbed off. Yesterday I met Mr. Harrington and had the benefit of his views. He told me that the article which appeared in the Press was a version of a two-hour interview which he had with a journalist and that the result was very much the journalist's interpretation of what happened. I am not suggesting that Mr. Harrington is seeking to transfer the blame to somebody else, but he said that that is what happened.
Mr. Harrington appeared to be hurt by the fact that the Government are taking away from the Greater London Council about £200 million. Indeed, I understand that Mr. Harrington and the Minister had a meeting 10 days ago on this topic. I regret that London Members of Parliament were not invited. We could have given him the benefit of our views. I told Mr. Harrington, "It is all very well to have a private understanding with a Minister, but when you lose out you start to squeal". It was no use squealing when they did not have the courtesy to invite us along to the meeting. I understand that the Greater London Council, having regard to the high rates in the London area, cannot carry on doing work which is expected of it. Therefore I ask my hon. Friend to look at this again and possibly to be a little more helpful to London.
I recognise that my hon. Friend will say, as so many of his colleagues say, "If we make a special exemption for London, I shall have Newcastle, Durham, Liverpool and everyone else on my doorstep asking for the same." I understand the argument. If I lived in one of those areas I should take the same view. But the tragedy of this, as we found in the IDC situation, is that our provincial colleagues really are not well briefed on the situation in London. When I speak to my colleagues outside this Chamber and explain to them what we are talking about, I find that they are not aware of the problems that London has to face. My right hon. Friend the Secretary of State never stops telling me when I speak of the problems of London that London has no relationship to Grimsby at all. We seem to live on 1095 a different planet. Our difficulties are completely apart. Therefore, I hope that it will be understood that when we talk of London being different we are not being arrogant. We are not pretending that in some way there is something about us which is better than others. We are saying that there is no other part of the country with the same problems. There are not the enormous difficulties in the rest of the country that face us in some of our areas —and my own is one. The situation is becoming desperate.
I first began searching my mind for alternatives to the rating system in 1949. I wish that I had as many pennies as papers and words that I have published on the subject. But, like so many others before us and like so many others after us, including Layfield, I have not come up with very much. The rating system began in 1603, and, bad as it is, no one can find a better alternative. We have been through all the suggestions before, and we have rejected them for one reason or another.
I ask my hon. Friend the Under-Secretary to take a special interest in the London situation so that my colleagues in local government in London can feel that he understands the problems and, what is more, is prepared to do something about them.
§ 3.38 p.m.
§ Mr. Cyril D. Townsend (Bexleyheath)
It is easy for me to make only a few brief comments on this subject since the hon, Member for Hackney, South and Shore-ditch (Mr. Brown) has made half my speech for me. He put the case for greater London eloquently, and I commend his words to the Minister.
If I may give the London figures, we are receiving 36 per cent. of the rate support grant whereas our average rates are about 40 per cent. above those for the rest of the country. Those dramatic figures speak for themselves.
In my view, the last Conservative administration attempted too many reforms rather than too few, but I confess that I regret that it did not get round to reforming local government finance at the same time as it reformed local government
1096 In approaching this subject, I have two main starting points. The first is that local authority expenditure is growing faster than the economy. Secondly, strong local government must be underpinned by buoyant sources of local revenue.
We have been told ever since the war that the rating system is about to break down. But I believe that the moment of truth has now come, and I invite hon. Members to look at the situation in some London boroughs, especially Croydon, where there are real problems.
Inflation is currently running at an annual rate of 20 per cent. Present sources of local revenue are insufficiently buoyant, and the inherent unfairness of the rating system have been well covered in the debate.
Like my hon. and learned Friend the Member for Blackpool, North (Mr. Miscampbell), I regret that revaluation was shirked in 1968 by a Labour administration. That meant that for 10 years we went without revaluation. The Government are proposing to shrug it off again in 1978. I do not think that the Minister touched on this point when he made his admirable remarks from the Dispatch Box. I am convinced that if we are to use rates we must have revaluation. If not, some people will be getting away with it, and, that will increase the burden on the majority.
I am inclined to favour rates based on capital values, not on supposed rental values. If we are to have the rating system at all, I think that such a system would be more readily understood by the average household.
I appreciate that the yield from rates is large—exceeded only by tax on incomes. Rates can be varied from one area to another. They are cheap to administer and to collect. However, we must take more drastic action than the Minister seemed to be contemplating. The hon. Gentleman's remarks were fine in a normal year, but this is not a normal year. We have an inflation rate of 20 per cent. which may go up to 25 per cent.
We need a new approach to this matter. The Minister criticised the Conservative Government for not doing very much. Surely he realises that over the last year the economic situation in this 1097 country has totally altered and that local government faces an entirely new set of circumstances which require new measures to deal with them.
I have spoken several times about the importance of local authorities paying their own teachers. Frankly, we are beyond that point now. I accept that teachers' salaries should be paid by the central Government. That is one instant form of help that the Government can give.
The Minister touched on rebates. I believe that the application forms for rebates are too complicated. I went to my local town hall not long ago and looked at the form. As usual, it was designed by civil servants for civil servants. The average old-age pensioner would not understand that kind of form. There is tremendous scope for voluntary and, indeed, political organisations to get the message across. The GLC certainly was and I think still is, advertising on television. That is obviously a useful method of getting the message across. But we meet a point when it becomes uneconomic to go on doing that.
§ Mr. Ronald Brown
This is an important point. Does the hon. Gentleman agree that one difficulty that we have in assessing a person's reasonableness in applying is that we do not know what the base line is? Will the Minister consider whether a yardstick could be devised so that we might know whether people fit the bill when they apply?
§ Mr. Townsend
I welcome that intervention.
I turn now to alternative sources. I am a great enthusiast for lotteries. I believe that they should be related to artistic and sporting projects. Lotteries would syphon off a lot of the money going to organisations which raise funds for purposes abroad. I worked in Hong Kong for two years. The Hong Kong Government organised the most efficient lotteries and equipped their excellent medical centres and operating theatres out of the proceeds. The Government have got into —
§ Mr. Marcus Lipton (Lambeth, Central)
Before the hon. Gentleman leaves Hong Kong, may I ask him to tell us about the rating system there, if any?
§ Mr. Townsend
No. I must try to keep my remarks brief. I must not go too deeply into what is done in Hong Kong.
I believe that the Government have got themselves into a muddle over the Lotteries Bill. Frankly, I think that my right hon. Friend the Member for Crosby (Mr. Page) had a better suggestion initially.
I should like to see a poll tax on a "bob-a-nob" principle based on the numbers in each household and in each place of work. That would place yet another burden on industry, but it would be simple and practical and might be a suitable addition.
London Members have shown considerable interest in the idea of a tourist tax—as a possibility only. A percentage levy on hotel taxes as a planning aid would help this city by means of differential taxation as well as producing income.
We are enormously conscious that by 1980 1 million tourists a year will be visiting Greater London. There is a population of only 7 million in Greater London. Surely we should be allowed to tap some of that potential revenue.
Another possible approach is one that London has talked about year after year —namely, a local sales tax. I am not sure whether that is realistic. Nor do I like the idea of a fuel tax. The fact remains that the demand on local government resources in the years ahead will far exceed the resources at present available. Some supplemental source of money must be found if London's residents, workers and ratepayers are to be properly served and if, in the centre of our metropolis, the basic structure of civilised society is not to collapse like a wet tent.
There was one theme in the speech of the hon. Member for Hackney, South and Shoreditch which I cannot support. I believe that the GLC has put itself in a unique and impossible situation. The hon. Gentleman talked about cuts. It is true that there were some cuts during the six years of Conservative rule. The reason that the GLC was able to peg its rates for two years at a time of high inflation was that it put that pegging as a top priority. I remind the hon. Gentleman that the GLC initiated a work study programme which was saving some £4 million a year. Its organisation and methods 1099 procedure produced a saving of £0.8 million a year. Its office work measurement produced a saving of £0.2 million a year. The Labour administration inherited the benefits of those schemes.
§ Mr. Ronald Brown
The Greater London Council and the London County Council both had organisation and methods procedures long before 1967.
§ Mr. Townsend
I accept that. All I am saying is that the GLC took the question of reducing expenditure very seriously and with considerable effect when it was controlled by a Conservative administration. That is why it was able to peg its rates for two years. The proof of the pudding is in the eating.
I am immensely critical of the 80 per cent. increases in precept that the GLC has put forward this year. It follows an 85 per cent. increase last year. Having listened to some of my hon. Friends today, it jars that in London we are talking in those terms. One of my hon. Friends mentioned a 21 per cent. increase and implied "Aren't we doing well?" Another of my hon. Friends mentioned a 27 per cent. increase. The GLC is much more of a free agent than many of the London boroughs. Unlike many outer London boroughs, the GLC has failed to make superhuman efforts to cut its estimates in the public interest.
It seems that since Labour assumed control of the GLC some Labour councillors have gone out of their way to be generous in their handling of public moneys. I shall give six examples. My first example is the London Transport fares standstill. Ratepayers now face a deficit of over £126 million. Secondly. there has been the even more foolish standstill of GLC rents for two years. The average rent of a GLC dwelling is only £254 a year. We can guess who pays the rest. Municipalisation is now costing £70 million a year. It does not build one extra house. The increase in GLC staff has already been covered: there has been an increase of over 3,000. Further examples are the accumulation by the GLC of land on which it has to pay massive debt charges and the doctrinaire refusal of the London Labour Party to permit commercial development, particularly in London, which contracts the rate base. Those are six examples of how the 1100 GLC has gone out of its way to be extravagant.
I think that we have in our different ways put forward a number of suggestions for the immediate future and the longer-term future during this interesting debate. I press the Government to do something in their next Budget and not merely to wait for the Layfield Committee to come up with a long-term solution.
§ 3.49 p.m.
§ Mr. Alan Clark (Plymouth, Sutton)
I am not sure whether this is a concluding speech. but I assure the House that it will establish a record for brevity.
We have heard much about the hardship and difficulties of those who are bearing the burden of paying the rates. The Minister, in a most reasonable and forthright resumé of the situation, asserted that the increases in earnings and wealth were to some extent keeping pace with the increases in the rate burden, but I am sure that he would agree that there are many exceptions to that. Indeed, I should think that the exceptions are in a majority.
The question which the House should consider is this: what if those who are carrying the burden of rates refuse any longer to do so? I think that it was the hon. Member for Sunderland, South (Mr. Bagier) who said that the rates had the merit of being very easily collected. But there are cases in which the money is simply not there. The hon. Member for Hackney, South and Shoreditch (Mr. Brown), who. I am sorry to say, has left the Chamber—
§ Mr. Clark
I hope that the hon. Gentleman will not intervene with his answer. He may communicate it to me later. I was about to suggest to him that if he feels so strongly about rate revolutions he might care to join us in the Lobby next Tuesday when the question of the Clay Cross councillors will be decided.
There is no question of revolution. It is simply that there is a positive danger that inability to pay rates may combine with indignation and lead to widespread refusal to pay—not an absolute refusal but certainly a refusal to pay in any hurry, and perhaps, even to leave it until a judgment summons has been issued.
1101 Should this happen on a widespread scale the effect would be that local authorities' loan interest could no longer be paid and that the Government guarantees would, therefore, be invoked. This would have a catastrophic effect on the Government's cash flow. There would be only one recourse open to them, which would be directly to print the money—and that would lead to a state of hyperinflation.
Ratepayers have, by the possibility of their collective action, the ability to threaten damage in the fiscal field every bit as serious as the most powerful monopoly bargaining power of the most powerful trade unions in the industrial field.
it will be asked whether this element of indignation is not justified to some extent. We all know—we have personal knowledge in our constituencies—of the enormous extravagances and the whole plethora of empire building and duplication. My hon. Friend the Member for Reading, North (Mr. Durant) mentioned the new offices being built, and so on. Repeated duplication by overlapping authorities leads to extravagance. That is one of the real sources of the indignation which may, as I say, combine with an inability to pay in many instances and lead to a refusal or to a dangerous deferment.
What is needed is a major, fundamental and decisive reduction in local authority expenditure before the climate of cooperation on the part of the ratepayer is altered.
§ 3.53 p.m.
§ Mr. Marcus Lipton (Lambeth, Central)
I apologise to the hon. and gallant Member for Eye (Sir H. Harrison), for the fact that I was not present when he made what I have no doubt was a very eloquent and moving speech about rates. But I was here in time to hear my hon. Friend the Member for Hackney, South and Shoreditch (Mr. Brown) telling the House of the difficulties that face London ratepayers to a much greater extent than ratepayers in other parts of the country.
However, before I come to the special conditions which prevail in London I should like to make a suggestion which would reduce almost at a stroke—if I may use that phrase—the burden of rates on 1102 the ratepayer. It is this: take the whole cost of education out of the local rating system and make it the responsibility of the State.
I know that there are arguments against that, and that some local authorities jealously regard their schools as a special privilege and special prerogative. But the time has now come, even facing the dangers of government from Whitehall, to take education out of local government altogether. When it comes to a question of financial responsibility for education, we can still have local school managers fussing around and deciding the domestic details that should prevail in the school. I imagine that there is not one local authority in the land where education is not the largest single impost.
I now go on to deal with a suggestion made by the hon. Member for Bexley-heath (Mr. Townsend). He suggested a poll tax as an alternative. I cannot imagine how a poll tax could possibly operate in an area such as Brixton, where the inhabitants of the houses change almost from week to week. It would be necessary to have a date on which the poll tax would be applicable, but when the time came to levy the tax the chances are that the gentlemen who were liable would long since have disappeared. One cannot have a poll tax where there is a floating migrant population. It will not work.
That brings me to the other point mentioned by my hon. Friend the Member for Hackney, South and Shoreditch, namely, that, however much we try to find a substitute for the present rating system, it is virtually impossible to discover one. If my hon. Friend has tried since 1949—when he first started thinking about it—and has not discovered an alternative, I do not believe that anyone in the House is capable of finding a practical solution.
The lottery idea is a wash-out. It will not work, and will not make anything like a useful contribution towards solving the problem.
It may be that a tax on tourists would produce some revenue, but it seems a little hard that people wanting to come to London should be taxed for the privilege of doing so. We want people to come here, if only from Watford and the outlying 1103 suburbs, and it would be a severe imposition if they were to be subjected to a financial penalty.
Many new hotels have been built in London during the last year or two, and they have many empty bedrooms. I cannot see how a tourist tax would help these new hotels, which have provided accommodation at Government expense.
Reference has been made to the burden on the rates which arises from the cost of London Transport. Fares are to be increased, so that the liability on the GLC will be reduced. I am afraid that fares will continue to increase so long as the expense of providing London with a reasonably efficient transport system continues to be necessary.
§ Mr. Ronald Brown
My hon. Friend will be aware that the GLC has carried out an examination of this matter. The danger is that the rise in fares will be such that it will reduce demand, which will mean that services cannot be maintained and will have to be reduced. This will result in a further loss of demand, and create chaos.
§ Mr. Lipton
That is a valid point. I want to leave it and refer to what I have always regarded as a serious undemocratic burden on the London ratepayer. I refer to the Metropolitan Police precept. All that happens is that a notice is sent to all the London authorities saying that so much is needed, and they have no control over this. This is the only area in the whole of England, Scotland and Wales where the local authority has no control over the police. What makes the situation even worse is that the Government are making a measly contribution of about—
§ It being Four o'clock, the debate stood adjourned.