HC Deb 22 January 1986 vol 90 cc290-1
3. Mr. David Atkinson

asked the Secretary of State for the Environment if he is yet in a position to say when he plans to publish his Green Paper on rate reform.

The Secretary of State for the Environment (Mr. Kenneth Baker)

I hope to do so next week.

Mr. Atkinson

As the rate support grant system is utterly discreditable and incomprehensible and this year continues to penalise the thrifty, will my right hon. Friend use the opportunity offered by his Green Paper to abolish it lock, stock and barrel and to replace it with a system of local government financing which will hold councillors more accountable to their electorates and broaden councils' scope to raise expenditure?

Mr. Baker

I completely agree with my hon. Friend that the purpose of any change should be to improve local accountability and to bring home to local electors the consequences of their councils' spending.

Mr. Cartwright

Does the Secretary of State recall the view of the Layfield committee, that local income tax offers the only realistic way in which to provide a new source of revenue for local government and to increase local accountability? If so, why is he going for a flat-rate system that will bear most harshly on those most in need?

Mr. Baker

I must ask the hon. Gentleman, who speaks for the Social Democratic party on these matters, to await my Green Paper. I understand from what he said that the SDP is now in favour of local income tax, but I think he will find that it has certain unattractive features which might become more evident the more it is examined.

Mr. Heddle

Reverting to the last question, does my right hon. Friend agree—

Mr. Speaker

Order. We cannot do that. We are on this question.

Mr. Heddle

Does my right hon. Friend agree that abolishing the rating system in its present form root and branch and replacing it with local income tax would increase the standard rate of tax by at least 13p in the pound? Would that not be a total disincentive to every person in the country to work?

Mr. Baker

Those are the questions that the SDP will have to answer when it formulates its proposals for reforming local government financing.

Mr. Freeson

Reverting to the first supplementary question, may I ask whether the Secretary of State intends or expects to bring forward legislation on this major reform, for which we have waited 10 years, during this Parliament?

Mr. Baker

That depends on when the next election will be. I intend to consult widely during the coming months. We will then be able, I should think at about this time next year, to present a White Paper setting out the Government's proposals clearly so that, by the time of the next general election, all parties will be able to set out the attractions of their proposals to the electorate.

Mr. Robert B. Jones

Can my right hon. Friend assure me that any proposals in his Green Paper concerning the rate support grant system will be fairer to counties such as Hertfordshire? What possible morality can there be in the average rate support grant being 46 per cent., when rate support grant for a country that keeps its expenditure under control is only 13 per cent.?

Mr. Baker

My hon. Friend, who is knowledgeable about local government finance, has put his finger on the point. One of the elements of local government finance is the system known as resource equalisation, which means that there is a substantial transfer of resources from more prosperous areas to less prosperous ones. It has been endemic in the system since 1929. My hon. Friend will find that in the Green Paper I quantify it, set out the pros and cons about whether it should remain, whether it should be reduced and over how long it should be phased out, if it should be phased out.

Mr. James Lamond

What is the point of the Government trying to improve local accountability when they have so far introduced 12 local government Bills, most of which restrict local councillors' ability to carry out the mandates on which they were elected?

Mr. Baker

The hon. Gentleman goes to the heart of the problem. When the Green Paper comes out next week, he will see that there is a clear choice, not only for the House, but for the country, as to whether there should be more central control of local government or more local accountability. In essence, this is a constitutional question.

Mr. Ward

When my right hon. Friend brings his proposals for reforming the rating system before the House, will he bear in mind that, while many of us accept the need for some redistribution, there is great resentment in the shire counties because money is being transferred to areas where there is no local accountability and large sums are squandered on hare-brained schemes?

Mr. Baker

I agree. The whole thrust of my proposals, as my hon. Friend will see, is to give local authorities greater responsibility for making their own spending decisions so that they can say to their electors, if they want to support proposals, that it will cost them so much. At the moment, when a local elector goes into the polling booth and makes a judgment on his council, he finds it exceedingly difficult to judge whether the council is efficient or inefficient and whether it is thrifty or not, because of the complicated grant system.