HC Deb 19 May 1976 vol 911 cc1415-21
The Secretary of State for the Environment (Mr. Peter Shore)

With permission, Mr. Speaker, I wish to make a statement. The Report of the Committee of Inquiry into Local Government Finance— the Layfield Committee—is published this afternoon. Copies are available in the Vote Office.

The committee was appointed in the summer of 1974 by my predecessor together with my right hon. Friends the Secretary of State for Wales and the then Secretary of State for Scotland. Its terms of reference were to review the whole system of local government finance in England, Scotland and Wales, and to make recommendations". The committee presented its report in March of this year.

This is, as the committee points out, the first comprehensive review of local government finance since 1914. It was, therefore, bound to be a major undertaking, and we are grateful to Mr. Frank Layfield, QC, and his colleagues on the committee for completing their work within 21 months of their first meeting. This is a tribute to the intensive work put in by the members of the committee.

The report itself runs to nearly 500 pages, and I will not attempt to summarise it in a short statement. Nor will the House expect me to announce today any decisions on the committee's recommendations. The Government will want, first, to hear the views of local government, of other interested parties, and, of course, of both Houses. Secondly, the committee has provided not a single clear-cut list of recommendations but a fundamental analysis of the present state of local government finance. It concludes that the design of a system of local finance must depend on the view taken about what the whole relationship between central and local government should be. Thirdly, as the committee acknowledges, The detailed implications of our recommendations would require very much more time to explore than was available to us. To take one conspicuous example, the proposal for a local income tax is indeed complex. The report recommends that if much greater freedom of action were to be given to local authorities, a local income tax should be introduced so as to reduce their dependence on Government grants. I must stress that the committee envisaged local income tax as a supplement to the rates and not as a substitute for the rates. This proposal obviously requires very careful consideration.

We propose to press ahead urgently with our consultations and studies. My right hon. Friends and I will be discussing the report with the Consultative Councils on Local Government Finance and with the Convention of Scottish Local Authorities. Naturally, we could not write to all the vast number of other parties with an interest in local government finance. But we are anxious to obtain the widest possible knowledge of public and professional opinion. I would therefore urge any interested organisations or individuals—including, of course, right hon. and hon. Members—to send us their comments.

I fully appreciate how complex are the issues raised in the report of the Layfield Committee and that local authority associations and others are already occupied with preparing comments on other important documents, including the Transport Policy Review. Nevertheless, we should press on urgently with the consideration of the Layfield Report and I think that interested parties ought to be able to come to a view on the issues raised within the next six months. So I must ask that comments be submitted by the end of November.

Progress thereafter will depend on the outcome of our consultations, but we shall aim to come to decisions and to report to the House as soon as possible.

Mr. Raison

Is the Secretary of State aware that hon. Members are in their usual difficulty of being expected to ask questions about a report which none of us has seen? Is he also aware that we shall need to see the full evidence before coming to a view? Will he confirm that what is published today does not include the full evidence? Will he also tell us when the full evidence will be published?

I am sure that the House will wish to join the Secretary of State in expressing thanks to Mr. Layfield and his committee, because there is no question but that they have worked extremely hard over these last few months. We should like to record our appreciation.

The right hon. Gentleman said that he wanted to hear the views of the House. That is quite right. Will he give us some indication of when he expects a debate to take place on the Layfield Report?

Is the right hon. Gentleman aware that we shall look very closely to see whether the report in any way meets our deep-rooted objections to the present rating system? Is he also aware that, on the face of it, we have serious doubts about the cost of administering a local income tax.

Finally, we note the Secretary of State's comment that the period of consultation is to last until the end of November. Will he confirm that, therefore, there will be no possibility of legislation before 1977–78 at the earliest?

Mr. Shore

I think that I can help the hon. Gentleman in replying to a number of his questions. I must warn the House that the full evidence runs to about 5 million words, but I am informed that what we assume to be the most interesting part of the evidence can be published in about six or seven volumes and that we hope to have them ready by the autumn.

I know that my right hon. Friend the Leader of the House is always sensitive to the wishes of the House regarding debates. I am sure that what has been said will be drawn to his attention. I think that the House would agree with me that a debate would be extremely welcome and useful as soon as we have all had time to consider, as we must, this large and complex report.

The hon. Gentleman referred to the Opposition's objections to the existing rating system. I have heard that the Conservative Party has objections to the rating system. I have also heard many of my hon. Friends object to it. But I must stress that the Layfield Committee does not propose that the rating system —there may be modifications—should or could be abolished.

Finally, I think that the November deadline is reasonable. We shall hope to have a number of comments by that time which should enable us to come to conclusions and to be ready for legislation in the following Session.

Mr. Blenkinsop

Is my right hon. Friend aware that there is strong feeling on both sides of the House that there should be a relatively early debate on this subject when the House reassembles after the brief Spring Recess? Is he further aware that some of us, at any rate, believe that there is a link between the Layfield Committee's proposals and devolution questions and that it is essential that we should have a statement on the Government's views on devolution so far as that affects England, as well as other parts of Great Britain.

Mr. Shore

I understand my hon. Friend's concern that we should have proposals as soon as may be on the question of devolution as it may affect England, and of course, there could well be connections between the Layfield recommendations and any proposals that were finally agreed on the question of devolution. I am afraid that I have nothing to add to what I have already said about a debate.

Mr. Penhaligon

Does the Minister agree that it is quite incredible that a review of local government finance should take place after local government reorganisation? Does he agree that more logic would have ensued if the subjects had been approached the other way around?

Mr. Shore

I think that I can afford to take a rather relaxed view in reply to that question. There is a certain logic in what the hon. Gentleman says. I certainly was not Secretary of State for the Environment at the time. However, probably in an ideal world the two matters might have been considered together.

Mr. Mellish

I want to raise something that is not a party political point. My right hon. Friend will know that one of the great anomalies in local government finance, particularly on the housebuilding side, is that from the moment that his Department gives loan sanction, the debt starts—from that moment—although probably that for which the loan sanction has been given does not bring in a single penny of revenue for 18 months or two years or more. This is a very long-running sore. Does Layfield make any recommendation about that, and if so, what?

Mr. Shore

I regret that there does not spring immediately to my mind a particular reference to that matter. However, I would assume that there will be parts of the committee's general assessment of the implications of the present way in which local government finance works which would be relevant to housing, and although the fact of a housing policy review was something of which it took account, it did not specifically deal with housing questions.

Mr. Gwynfor Evans

Will the right hon. Gentleman confirm that on pages 166 and 167 of the report there is reference to the possibility of rating agricultural land? Is he aware that that will be totally unacceptable to farmers, in that it will add so much to their costs, and totally unacceptable to housewives, in that it will add to the cost of food in the shops?

Mr. Shore

The House will have heard what the hon. Gentleman said. The House will also now know that among the many recommendations of Layfield is a recommendation that the derating of agricultural land should cease. But this is one of the matters which the House and others will need to consider and discuss.

Mr. MacCormick

Does the Minister appreciate how monstrous it would be to increase the complexity of local government in Scotland by, for example, introducing a local income tax, however desirable that might be in the long run, before the present two-tier system of local government in Scotland is changed and we get rid of the top-heavy regional system?

Mr. Shore

The structure of local government in Scotland and in England and Wales is, in a sense, a separate matter. However, I think that the point on which we all have to clear our minds is whether the line of argument that leads the Layfield Committee, on balance, to say that it is in favour of a local income tax is a line of argument that commends itself to the House.

Mr. MacFarquhar

Is my right hon. Friend aware—even without reading all the 5 million words of evidence—that dissatisfaction with the present system of local government finance is widespread but that any decision to preserve the rating system and to add on top of that a local income tax would be greeted with widespread dismay by all?

Mr. Shore

My hon. Friend's understanding of the recommendations of the Layfield Report is broadly correct. As I emphasised in my statement, the Layfield Committee does not see local income tax as a substitute for rates—certainly not in any substantial part. Therefore, the fact that it is recommending a local income tax as a supplement to the rates is a fact that undoubtedly my hon. Friend and others will take into account.

Mr. Fry

Will the right hon. Gentleman confirm that he is fully aware that the main reason for public grievance about the present rating system is that it bears little relation to ability to pay? Will he give an assurance to the House that the Government take cognisance of that fact and will bring forward proposals that are much more equitable in relation to a person's income?

Mr. Shore

The House will want to study the report, but among the committee's proposals for changing the existing rating system is a proposal to change the basis on which the rates are levied so that it would take account not merely of property values in the areas upon which the rates are levied but of the income of the people in the areas concerned.

Mr. Ward

Will my right hon. Friend confirm that the report completely rejects any suggestion that the total cost of education should be transferred to the Exchequer?

Mr. Shore

Yes. The committee does not find anything to recommend itself in that proposal. That is something that will be thought about very carefully on the Opposition side of the House.

Mr. Michael Morris

As the report is already nearly five months late and as the Secretary of State has said that there will be another six months of consultation, is he saying to ratepayers up and down the country that there will be no help for them at all for at least another two years?

Mr. Shore

I am glad to say that most ratepayers are, on the whole, feeling less bruised, as it were, by the rate levels which were announced this April than they were by the very severe rate increases which they experienced in the preceding three years. However, it is impossible to think of any major changes being agreed and introduced before the next rating year.

Several Hon. Members

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Mr. Speaker

There are to be two other statements. We cannot debate this subject now.