HL Deb 13 July 1910 vol 6 cc121-62

*THE EARL OF DUNMORE rose to call attention to the financial relations between the Imperial Exchequer and local authorities, and to the inadequacy of the present grants in aid of local taxation having regard to the annually increasing duties thrown upon local authorities by Parliament; and to move for a Return giving particulars of the financial relations in the principal foreign countries and in British possessions between the central and the local governments.

The noble Earl said: My Lords, in rising to propose the Motion which stands in my name I feel that some apology is due to your Lordships for introducing the well-worn topic of local taxation which has already been the subject of many debates in this House. About two years ago the noble Earl the Chairman of Committees introduced a somewhat similar discussion when he moved for a Return bringing up to date the Blue-book known as the Fowler Return, which was issued in 1893 by Sir Henry Fowler, who has since become an honoured member of your Lordships' House. A very interesting discussion took place on that occasion, although the Government excused themselves, on the score of the labour involved in a busy session, from granting the Return asked for by Lord Onslow; but the Leader of the House undertook to confer with the President of the Local Government Board with a view to affording of the information desired. In these circumstances Lord Onslow did not press his Motion, and, so far as I am aware, the Fowler Return, which relates to the expenditure of the various local authorities throughout the country, has not been brought up to any date more recent than 1893.

There is, of course, a good deal of statistical information issued by the Local Government Board in its annual Report to Parliament, and some particulars also contained in the annual local taxation returns. There is, in fact, no lack of statistical material in connection with local finance, but the subject is so vast—I might say so complicated—that few people desire to struggle through the details. But if any excuse is required for introducing this subject again, I think it may be found in the fact that so many members of this House are especially well qualified to deal with this subject owing to their great experience in local administration. We also have the advantage in this House of many members who have not only had to look at this question from the point of view of local administration, but also from the somewhat different attitude of Ministers of the Crown responsible for the relations of the central government to the various local authorities. These facts, together with the growing importance of the financial aspect of local government, encourage me to believe that your Lordships may not regard a discussion of the Motion which I have the honour to bring forward as altogether a waste of your Lordships' time.

I desire this afternoon to deal more particularly with the position which is arising in regard to the grants from the Imperial Exchequer towards the expense of certain services of local authorities. I suppose there must always be a certain amount of rivalry between local and Imperial claims, as there will always be some divergence of opinion as regards services which are of a purely local and those which partake of a more national character. This division of the services administered by local authorities formed much of the consideration which was given to this subject of local taxation by the Royal Commission on Local Taxation which was presided over by my noble friend Lord Balfour of Burleigh with so much ability. That Commission reported as far back as 1901, and I am sorry that so little progress has been made since that date by any Government in dealing, with this question. But I am glad to acknowledge that the Chancellor of the Exchequer, in his recent Budget statement, informed us that in his opinion this question of the readjustment of local and Imperial finance could not be postponed beyond the year, and that whoever occupied the position of Chancellor of the Exchequer next year would have to deal with it. I confess that I should like a fuller assurance from His Majesty's Government that they do intend to deal with this question at an early date, for the financial aspect of it is really most important. I might almost add, without being inaccurate, that it is most depressing.

Certainly from the point of view of an economist there is little that is reassuring in a survey or our public expenditure, while the position of the unfortunate ratepayer is a grave reflection on our system of local self-government. And what is the reason? I think the real reason, the root of the matter, is to be found in our system of municipal representation. There are far too many electors in this country who care nothing about the rates. Many of them imagine that they pay no rates, owing to our unfortunate system of compounding. I think there is a. good deal to be said with regard to the defects of that system, although I shall not trespass on your Lordships' time to-day by going further into that matter. Then we see great powers given to our local bodies. Those bodies by their very constitution are open to be used, and are used by Parliament, for the administration of all those Acts which the demands for social reform create almost every day. But in putting these new duties on to local bodies the Government exercise no official supervision. I have been told that the President of the Local Government Board has kept a somewhat restraining hand recently on the borrowing powers of some of these local authorities. That may or may not be true, but I am quite sure of one thing—that he has not protected those same local authorities from the extravagant demands which have been put upon them by Parliament.

The Imperial taxpayer is in a very different position. He can resent to some extent the imposition of new taxes. He can make his voice heard to some extent in the Houses of Parliament, and, if he is of an optimistic nature, he may even look to the Chancellor of the Exchequer to protect his interests. But the difference in the attitude of Parliament towards local as compared with imperial expenditure is shown, I think, in a small but very significant manner, in the form in which Bills are presented. Bills which create new charges on Imperial funds can only be brought forward in the House of Commons by a Minister of the Crown. A private Member is not allowed to suggest the imposition of new taxation. Formerly when a Bill was printed the taxation proposals were left blank, and now they are printed in italics until the necessary Motion has been brought forward by a responsible Minister and carried. There is no such safeguard as regards the ratepayer. His pocket is open to he picked by anybody who chooses to suggest fresh legislation the result of which will be to increase the rates. In fact, local finance has been regarded with indifference by Parliament, and the result is to be seen, not only in the present injustice of the incidence of rates, but also in the alarming increase in our local expenditure.

Speaking on this subject in the House of Commons in 1881, Mr. Gladstone said— What we have to do is to strive honestly and impartially to keep down the aggregate total expenditure of the country, whether it be local expenditure or Imperial expenditure. That is the interest and that is the duty of Parliament.

That remark was made in the course of a debate on a proposal that just as an annual Budget is prepared for the Imperial Exchequer of the country, so the House of Commons should devote some portion of its time to the consideration of a Budget relating to the local finances of the country. I do not wish to unduly weary you with masses of figures. I know that the mere recital of figures is apt to be far from impressive, especially when, as is so often the case nowadays in speaking of public expenditure, those figures amount to many millions. But I would like to remind your Lordships that the present local expenditure in the United Kingdom exceeds £160,000,000 a year, and, as your Lordships know, the Chancellor of the Exchequer is budgeting for an Imperial expenditure of about £170,000,000 this year. It is true that some part of that Imperial expenditure in the Budget will go to relieve the amount which has to be found. by the rate payers. but taking local and Imperial expenditure together we are now paying for the public administration of this country considerably over £300,000,000 a year; or, if I may put it in another way, it is costing us not far short of £1,000,000 every day to run the public business of this country; and if the life of the present Government be unduly prolonged, I have no doubt that it will take £2,000,000 a day to run our public business, and that every other man in the United Kingdom will be employed by the State in carrying out its administration.

In the face of these facts it may be said that it does not matter whether the money comes out of the pockets of the ratepayers or out of the pockets of the taxpayers. If the basis of taxation were the same or even similar for local as for Imperial expenditure, that might be the case; but the incidence of local and Imperial charges is by no means the same, and the importance of the financial relations of the central Government to the local authorities is of the first magnitude. In discussing this subject I should like as far as possible to avoid going over old ground, but perhaps your Lordships will allow me to go back a little way and recall to the House that prior to 1888 the Parliamentary grants which were annually voted in aid of the rates were appropriated to specific services and bore some relation to the expenditure on those services. But in 1888 a great change took place. This was in the substitution of the system of assigned revenues for that of grants in aid, and at the same time most of the direct grants were abolished or else were paid out of the proceeds of the assigned revenues. In assigning these revenues they allocated to the local authorities the produce of certain licences and one-half of the Probate Duty. This was done with a view to broadening the basis of local taxation for national purposes, and with a view of making the owners of personalty pay towards local charges. But it is not clear on what principle these revenues were assigned, for if there had been any distinction drawn between national and local services those revenues would have shown it in the sources from which they were drawn. But in any case, whatever principle these revenues were assigned on, and whatever distinction, if any, was drawn between these services, it has been entirely lost sight of in all the changes that have since taken place. Acts have been passed and changes have been made which show that the present system of assigned revenues is regarded by the Treasury merely as a measure of relief from the Imperial Exchequer to local funds.

It is true that these assigned revenues have been enlarged since 1888. They have been enlarged from two sources. First, under the Customs and Inland Revenue Act of 1890; and, secondly, under the Licensing Act of 1904. But putting aside the Parliamentary grants which were given in aid of elementary education, we find that the Education Acts of 1902 and 1903 have swept away all the relief which was afforded under the first of these sources by earmarking that revenue to go towards meeting the increased cost of higher education which was thrown on the local authorities by those two Education Acts. We also find that the recent Finance Act has swept away the relief which was afforded under the second of those sources by allocating the revenue obtainable from the monopoly value of new licences to the Imperial Exchequer. But apart from the effect of these two Acts, as a measure of relief the system of assigned revenues has failed. It was no doubt contemplated under the original scheme that the resources of local authorities would be automatically increased in order to correspond with the growth of the charges thereon which have to be met. No doubt it was thought that the yield of the assigned revenues would augment as years went on. It is true that the increase in revenue was fairly steady from the year 1888 to the time of the Report of the Royal Commission in 1901; but since that date this has been by no means the case. The total amount drawn from the Local Taxation Account in the United Kingdom has dropped from £11,150,000 in 1908 to £9,820,000 in 1909, and there is a further decrease to £9,445,000 in the year ended March 31, 1910. That is a drop of nearly £2,000,000 within the last two years.

The unfavourable position in which local authorities now find themselves is largely due to the alterations in the law which have taken place since the passing of the Local Government Act, 1888, alterations which have not only greatly complicated the system but which have also had the effect of reducing the amounts available for distribution amongst the various local authorities. Year by year Parliament passes Statutes imposing new duties and new charges upon local authorities. The object, no doubt, of these Acts is excellent, and the arguments by which they are supported are very strong; but the action of Parliament in this matter really amounts to nothing less than adopting an attitude of generous benevolence at the expense, not of Parliament, but of the ratepayers. I think harsh words would be used of the public philanthropist who practised his philanthropy by putting his hands, not into his own pockets, but into the pockets of his neighbours; yet that is the course which has been adopted by both Houses of Parliament.

I do not propose to deal in detail with all the Parliamentary delinquencies of this nature. I think the catalogue would be so long as to be absolutely wearisome. But I would venture to point out to your Lordships one or two instances of the kind of generosity to which I have referred. Under the Police Act of 1890 police authorities were compelled by Parliament to grant pensions to members of the police force. Part of this pension fund was found by the police force and a portion of it came out of the Imperial Exchequer; but the balance came out of the pockets of the ratepayers. I am sure that nobody will grudge the granting of pensions to such an excellent body of public servants as the police admittedly are; but the police service is a national one, not a local one; yet the greater part of the cost of the upkeep of this service falls upon local and not upon Imperial funds. Then within the last few days Parliament has had before it the Police (Weekly Rest-day) Bill, again an excellent Bill with most excellent objects, but its objects cannot be carried out without increasing the cost; and while Parliament has been giving this well-deserved privilege to the police force, the Government have refused to defray any part of the cost, which will now fall upon the local authorities.

Then recent Finance Acts have not proved by any means mines of wealth to local authorities whatever they may be to the Imperial Exchequer. The Budget of 1908 transferred from the Government to the local authorities the collection of the establishment and dog licence duties; but with an appearance of great generosity the Chancellor of the Exchequer allocated a sum of £40,000 to be divided up amongst local authorities in order to reimburse them for the extra cost of getting in these duties. In order to gauge the extent of this generosity one can remark that London's share of this grant only amounts to £4,000, while the cost last year to the London County Council of carrying out this new duty amounted to £12,000, or just three times the amount of the grant allocated; and no doubt in future years this cost will increase.

I have already made some criticism as to the effect of the Finance Act of 1909–10 on local funds, but I should like to say a few words in regard to the effect of the new Land Taxes which are imposed under that Act. When the Budget of last year was introduced with its proposals for the further taxation of land it contained no provision for helping local authorities out of that new taxation. Criticism was quickly offered on behalf of local authorities, many of whom, I think most of whom, had regarded this form of taxation as offering a possible future source of revenue for local purposes. Certainly in urban communities they regarded land values as a subject which they were in the future going to draw upon. I do not wish to discuss the vexed question of the justice or otherwise of the policy of taxation of land values. I would merely remark that prior to the passing of this Act most of the advocates of that policy had regarded it merely as a fund for local purposes. However, during the discussions which followed the introduction of this Budget the Chancellor of the Exchequer incidentally announced his intention of allocating one-half of the proceeds of the new land duties to the local authorities. No doubt Mr. Lloyd George thought that in allocating one-half of a tax which is regarded as being derived from a purely local source, he could in justice say that half a loaf was better than no bread, and that the local authorities would accept it. I am not at all certain that the local authorities are satisfied that half a tax is better than or equal to getting the whole tax. However, their opinion has not been asked, and they have to content themselves with the crumbs which fall from the table of the Imperial Treasury. The distribution of those crumbs has been long in suspense, but apparently from the recent Budget statement this new revenue—the local authorities' share of the Land Taxes—is merely going to replace the disappearing spirit duties. In other words, the decreased consumption of spirits has affected local revenue to the extent of £328,000, and this is now going to be made up by a grant out of Imperial funds, which is to include the local authorities' share of the yield of the Land Taxes. But when this revenue was allocated in the first place to local authorities, the gift was regarded as a spontaneous one, but apparently under these new proposals it is merely going to make up for a deficiency in Imperial revenue, for which local authorities are in no way to blame.

To enter even superficially into the relations between the Imperial Exchequer and the local authorities all over the country would be a work of considerable magnitude. I therefore propose to deal more specifically with the claims of London, and to leave the grievances of other local authorities to those of your Lordships who are better qualified to speak upon them. London has certain claims which are not shared by other local authorities. In the first place, her share of the assigned revenues, which were allocated to London on the basis of the discontinued grants in 1888, was unfair. These revenues were distributed among the various local authorities in proportion to the grants which they were receiving in the year 1887–8. But this basis of apportionment was not only unsatisfactory in its working, but distinctly unfair to London. In the first place, these grants did not at the time meet the requirements of London as compared to other localities. In the second place, this basis was on the grants of a. single year instead of being taken on an average of several years. Thirdly, no provision was made to meet the increased cost of the growth and the development of London and its suburbs.

Then as to the revenue which is paid to the local authorities from the duties on licensed premises, which are, of course, the most remunerative of all licences, London is again at a distinct disadvantage. The average size of the public-houses and licensed premises in London is much greater than in the rest of the country, but the graduation of the duty on licensed premises ceased at £700, and public-houses of an annual value of £1,000, £2,000, and upwards paid exactly the same as if they were only worth £700. Therefore it is evident that the yield from this duty is far less in proportion to the annual value of its public-houses in London than in the provinces. The average annual value of the public houses in London is over three times as great as the average in the country generally, and the proportion that the Licence Duty bears to the annual value of these houses in London is less than half what it is in the rest of the country. Under the recent Finance Act of 1909–10 the limitation of the graduation of the duty on licensed premises has been removed, but the extra revenue which will be derived owing to the removal of the limitation of this graduation has been assigned to the Imperial Exchequer. Therefore, the position of the London ratepayer is exactly the same. In fact, according to a recent legal decision the effect of the Finance Act will merely be to reduce: the assessable value of licensed premises,

London has, in fact, special claims on the sympathy of the Chancellor of the Exchequer. Her share of the Imperial contribution bears a much smaller proportion to the burden of local taxation than elsewhere. If we compare London in this respect with any of the county boroughs we find that in London, out of the heavy rates per £ necessarily levied, only 1s. 3¼d. is contributed by the Imperial Exchequer; Birmingham gets 2s. ld.; Leeds gets 2s. 4½d.; Sheffield gets 2s. 10d. In fact, if you take the ten county boroughs having the largest assessable value you will find they all compare most. favourably with London in this respect, their share of Imperial contributions bearing a much larger proportion of their burden of local taxation. But perhaps the most serious aspect of this problem is the fact that new services of a national character, as I have already pointed out, and new developments in the administration of existing services, are constantly being thrown by Parliament on local authorities. One of these services, which I have not yet alluded to, and a very important one, is education. New orders are constantly being evolved by Parliament necessitating very heavy expenditure by local education authorities. According to a return presented to the London County Council last March the extra net expenditure thrown on the council under Acts coming into force since 1904 amounted in the one year—that is, in the previous year—to over £450,000. Expenditure upon education is no doubt in a sense remunerative outlay. It equips us in an international struggle for trade and it should lead to better conditions of living; and if the increase in our expenditure upon education bore any proportion to the increase in the growth of our population, nobody would question the wisdom of this outlay. The objects of such recent Acts as the Act of 1907 for the medical inspection of children in our public elementary schools, and the Act of 1906 for giving meals to necessitous children, command the sympathy of all classes, although in regard to the last-mentioned Act it must result in a diminution of the number of self-supporting families in this country, and must throw an ever-increasing burden on those families who do support themselves and who support the State as well. In may interest your Lordships in regard to this Act to know that about two years ago the Berlin Municipal Council decided to discontinue giving meals through the education department of the council, and transferred the whole matter to the Poor Law.

But, my Lords, what I really object to, and what I think every ratepayer ought to object to, are the methods by which such Acts as these are passed by Parliament without any reference or any consideration being given to their financial results, while their cost and their administration is thrown in a light-hearted manner upon the local authorities without any increase, or any relative increase, of the Government grant. This piecemeal, haphazard sort of legislation has already produced chaos in local government. In some of the poorer districts in the country it has produced what in an ordinary business concern would be regarded as a condition of bankruptcy, as I am sure the noble Lord the Secretary for Scotland will admit when he recalls the fact that in some districts in Scotland the rates already amount to 20s. in the £ We must also remember that the full effect of many of these Acts has yet to be felt. At the present moment we have approximately about three-quarters of a million of children in our public elementary schools in London alone. I think one might anticipate the very heavy charge which will have to be met at some future date—say, in twenty years—in carrying out the provisions of an Act such as the Act I have just mentioned —for the medical inspection of these children. The Act, it is true, only compelled the inspection of children, but it gave powers to defray the cost of their medical treatment, and it has very necessarily led to provision being made for their medical treatment. None of your Lordships would like to go to your doctor and have your ailments diagnosed if no suggestion was made as to the provision of the necessary remedies, which in the position of these children you would be unable to pay for. Therefore, I think the London County Council were bound to pursue the course of making provision for the medical treatment of these poor children.

I have dealt at some length with education because it is one of the most important and the most expensive of the national services. It has been recognised to be distinctly a national service, towards the cost of which a part of the national revenue has been assigned. Now owing to the action of Parliament—I refer to the recent Finance Act—a great shortage in this revenue has taken place. In this case the Government, for the purpose of making up a deficiency in national revenue, are appropriating to the Imperial Exchequer part of the income which had been allocated to the local authorities. They are, in fact, robbing Peter to pay Paul. I think this is an argument against assigning revenues to local authorities from subjects which are also taxed for Imperial purposes, and which, therefore, must to some extent be indirectly affected by every Finance Bill passed by Parliament. The great evil of the present system really is that there is no proportion between the variation in the produce of the assigned revenues and the variation in the expenditure on national services. The expenditure on these services is always varying in an upward direction; the produce of the assigned revenues is also always varying, but frequently in a downward direction. There is no line of demarcation to show the relative responsibility which should be borne by the Imperial and local taxpayer for these services.

It is now nine years since the Royal Commission on Local Taxation issued their Report. Whatever difference of opinion may be shown by the Majority and the Minority Reports, they were unanimous in recognising the evils which exist, and they both recommended a complete revision of the system of Imperial subventions and increased aid towards local taxation. In saying this I do not wish to make any attack on the Party at present in power. The Prime Minister has expressed sympathy with the grievances of the ratepayers, and we have Mr. Lloyd George's opinion that whatever Party is in power will have to deal with this ques tion next year. I therefore think that we might hope, now that the Poor Law Commission has reported making recommendations of a very important character in regard to at least one branch of this subject, that some settlement might not be long delayed. As a member of the London County Council, the position of that body in relation to London ratepayers naturally presents itself to me most urgently. Rates within the London area undoubtedly bear very heavily on London industries, and London, as I have ventured to point out, is distinctly unfairly treated by the imperial Exchequer. I need not remind your Lordships that to thousands, I might almost say to millions, of the inhabitants of London every penny added to the rates which they are called upon to pay is of very serious importance. The London County Council have made out an unanswerable case for fairer treatment by the Imperial Exchequer, and while I sincerely hope that nothing will prevent the whole question being dealt with not later than next year, as indicated by Mr. Lloyd George, I would put in a plea, if it should unhappily be found impossible to deal with the whole question of local taxation next year, that in no circumstances should the favourable consideration of the exceptional position of London be further deferred.

I am afraid 1 have trespassed unduly on your Lordships' time, but I do not intend to offer any suggestions as to the solution of this most difficult question. I might, perhaps, say that it seems to me that increased. Imperial subventions can only temporarily alleviate the position of the ratepayer. Increased grants are apt to lead to increased expenditure on the part of spending bodies, and although I think it is absolutely necessary that the Government should do very much more towards the cost of these national services which they are insisting upon the local authorities carrying out, I think it will not be a complete remedy unless the system of levying rates is so altered as to bring home to every ratepayer the responsibility of his vote. In view, however, of the discussions which must arise when this question of the readjustment of local and Imperial finance comes under the consideration of Parliament, I venture to think that the Return for which I ask, giving particulars of the position in foreign countries and in British Dominions, will not be without some value. I therefore hope that His Majesty's Govern ment may see their way to grant this Return.

Moved, That there be laid before the House a Return giving particulars of the financial relations in the principal foreign countries and in British Possessions between the Central and the Local Governments.—(The Earl of Dunmore.)

THE EARL OF CREWE

My Lords, I must apologise for intervening so early in the debate, but I am, unfortunately, called away from the House, and I desire merely to make one or two general observations, leaving the specific points raised by the noble Earl to be more fully dealt with by others. But I am glad to take the opportunity of expressing a view which I am sure is shared by all members of your Lordships' House who are present—of congratulating the noble Earl upon the clearness and lucidity with which he has dealt with this most complex subject. The noble Earl touched upon certain controversial matters, and I do not profess to find myself in complete agreement with everything he said; yet at the same time he expressed his views throughout with marked moderation.

It appears to me that in lamenting, as we all do lament from time to time, the growth of national and of local expenditure, we must be careful to draw a line between expenditure which can be in any degree described as extravagant and that which is necessary and in some cases even remunerative. It is a distinction which is not always quite fairly drawn. For instance, in dealing with the expenditure of local authorities it surely is necessary, although different views may be held as to the desirability of local authorities undertaking certain local services, to differentiate between expenditure which can be at all fairly described as extravagant and expenditure upon water supply, upon lighting, and upon different forms of traction, which cannot be classified, of course, as expenditure out of pocket. On the general question the noble Earl seemed to lament our extravagance and to expect a higher measure of economy from noble Lords opposite if they were to sit on these Benches. It is not for me to foretell what might happen when noble Lords opposite return to office; but in the meantime I might remind the noble Earl that his friends are perpetually pressing upon us, urging upon us, increased expenditure in a great many branches, not merely as regards the defence of the country, but also as regards those measures of social reform upon which we are accused of having spent so much.

This subject, as I have said, is one of the most extreme complexity and difficulty. The noble Lord drew a distinction which we have all been accustomed to draw at any rate ever since the publication of the Report of the Committee on which the noble Lord, Lord Balfour, sat—the distinction between local and national services; and he instanced the ease of education. Education might, I suppose, in one sense be spoken of as a purely national service, but, on the other hand, it is, of course, a commonplace to observe that if that particular service is to be paid for by national funds it must be conducted under national management. If you deliberately choose to hand over to the local authorities a very large share in the administration of our elementary education system and our secondary education system as well, it follows, as a necessary corollary, that at any rate a considerable part of the expenditure must be found from local funds. I confess I was a little surprised to hear the police service spoken of so confidently by the noble Earl as being purely a national service. That is a view I should myself hesitate to take. I should have thought that the provision of local police might be compared not unfairly with local services such as lighting and others of a kindred character.

The noble Earl complained of us in one respect with regard to the allocation made under the new system of finance, of the Land Taxes to local authorities. He stated that so far as the Land Values Duties were concerned, those had always been looked forward to by urban authorities as a possible source of revenue. When there was a question of passing legislation through this House in which the local authorities would have directly obtained some of those Land Values Duties the proposition was not favourably received by your Lordships. But on the general question I should like to say this, that the more one looks into the question the more one sees that the increment arising from what are known as urban land values cannot properly be set down in its entirety to the exertions of the particular locality. It really is not the case, in the case of such towns, say, as Glasgow, Bristol, or Manchester, that the whole of the increment described under the name of land values is due, although, of course, a great part of it is, to the exertions of those who live in the immediate locality. Those who trade with the locality undoubtedly contribute their share towards that increment. On this particular point I should like to add that, even though the local authorities may have been disappointed in this particular instance, yet they have got their share of such duties as the Reversion Duties and of the Mineral Rights Duty, which I imagine never entered into their most hopeful dreams. Therefore if they have lost anything over the Land Values Duty they have gained on these other taxes. I think I might remind the noble Earl and the House that, in addition to those contributions, the Development Grant and the institution of the Road Board are all steps towards relieving the local authorities to some considerable extent from duties which otherwise might, in part, at any rate, have fallen upon them.

But my real reason for rising at this moment was to give the noble Earl the categorical assurance for which he asks. I can say quite definitely that if we find ourselves next year in the position of advising the Crown we shall make an attempt to deal with the whole of this subject. The noble Earl can take it from me that that is so. Of course, whether it might be possible to conclude the whole subject during the compass of a single session, I cannot say, but we shall certainly make the attempt; and we are now proceeding to gain information and to consider the methods by which the whole subject—one of enormous difficulty, I once more repeat—may be brought before the country in what I hope may prove to be a satisfactory form.

LORD BELPER

My Lords, I have no intention of occupying the time of the House at any length. I have so repeatedly had to bring forward questions with regard to the incidence of local and Imperial taxation and the hardship of national services being put upon the rates, that it would be almost an insult to your Lordships if I were to repeat on this occasion what I have so often reiterated. I rise in the first place to thank my noble friend for his very clear and admirable statement with regard to the whole of the local affairs with which he dealt. I have some experience of local affairs myself, and nobody knows better than I do the great compli cation and difficulty of describing accurately to gentlemen who are not so well informed as my noble friend is the actual state of the case. I listened with the greatest interest to the noble Earl's remarks, and I certainly think he gave the House a clear exposition of the actual state of affairs.

Let me say at once that when the noble Earl claimed that national services should be paid for out of national funds, he made no unfair claim. It is perfectly true, as the noble Earl the Leader of the House mentioned, that in a question like education a considerable part of the cost naturally must be paid by those who have to administer the work locally. The whole principle of local taxation is that some part, at all events, must be paid locally, and it would not be either fair or desirable that the whole of the funds should be found out of Imperial taxation. But in connection with education an enormous increase has been put on local sources since the earlier days to which the noble Earl referred—1889, 1894, and 1895. A return which I have in my hand shows that the increase in the amount raised locally, as compared with the earlier year 1889, was, in the year 1906–7,248 per cent. Large funds have, of course, been raised out of the Imperial Exchequer for this purpose, but the amount charged against local taxation has increased beyond all bounds.

As to the general points referred to by my noble friend, there was one which I am sure we shall cordially support. He protested, as I and many of my noble friends in this House have done, against Acts being passed through Parliament without any consideration of the cost thrown on the rates. I am glad the noble Earl again laid particular stress on that point, because it is one on which I do not think too much stress can be laid. You admit that the incidence of local taxation is inequitable and unfair, but the moment you have to find money for a particular purpose you accentuate the inequity and unfairness by putting the whole of the cost on local taxation.

There was one other point in my noble friend's speech to which I wish to refer—namely, as to the proportion, when we are going to get anything out of the Imperial Exchequer, which might be due to the different branches of local taxation. The noble Lord naturally thought that London had a larger claim than other parts of the country. I read in a newspaper the other day a statement with regard to county boroughs, in which the claim was made that they ought to have a much larger share than others; and, no doubt, if one went into the country one would find the country ratepayer making the same contention I have no wish to say anything about the contest as to what proportions we should get when we get anything at all. But at all events we must all join in trying to make some impression on those who have the administration of the affairs of the country, and I was happy to hear that the noble Earl, in the latter part of his speech, gave an assurance that if possible this question would be tackled within twelve months.

A deputation from the County Councils Association a few days ago went to see the Chancellor of the Exchequer, fortified with figures which we thought conclusive and which we had already sent to the right hon. gentleman. On behalf of the deputation I made some remarks with regard to the incidence of local taxation and the great grievances under which we suffered. I had not spoken for more than a very few moments when I was stopped by the Chancellor of the Exchequer, who said he cordially agreed in everything we put forward. He said that he was perfectly aware that the inequity of the present system was very great indeed, that he was conversant with all matters of local government, especially with regard to the county councils, and that all he wanted to be convinced of now was, not that some money should be given towards the relief of the rates, but how that could best be done. The right hon. gentleman admitted that it was a large question, and said that if it was to be taken up in a complete way it would require a very large sum of money; and he regretted that he was obliged to say that a farthing given here or a halfpenny given there would be of very little use. I am glad to know that he thinks the question is so important that it ought to be brought forward within the next year. But at the same time a starving man is not altogether reluctant to have a crust of bread given to him, even though he sees a very good bill of fare in front of him which he may be able to enjoy at some future date. We had a good deal of discussion at the deputation, and the Chancellor of the Exchequer concluded his remarks by appealing to the gentlemen from the County Councils Association that they should go into this matter and make some suggestion to him at a future date with regard to the way that this large sum of money should be found. That, to my mind, marks a distinct step on the part of the Government.

If the Motion of my noble friend is carried, I should venture to suggest the addition of certain words. The Motion reads— To move for a Return giving particulars of the financial relations in the principal foreign countries and in British possessions between the central and the local governments. I would like added to that the words— and of the methods by which funds are raised in such countries for the purpose of local government. The County Councils Association are at present sitting for the purpose of considering what steps they should take with regard to the request of the Chancellor of the Exchequer that we should go into this question. Obviously it might be a very large inquiry, and one of the first things that it would be desirable to know is how these matters are dealt with in other countries, and how these essentially large funds are raised. Even if the noble Earl the Leader of the House is not able to give a favourable answer to the request with regard to foreign countries, I do hope that in some form or another such a Return may be furnished. It will be of great value in view of the fact that these questions are going to be discussed, not only by the Government but by other people who are interested; and I am sure the County Councils Association would be very grateful for it.

TILE EARL OF CROMER

My Lords, I will not detain your Lordships more than a couple of minutes. I should like to say that I do not think there will be any very serious improvement in these matters until the Government of the day, whoever it may be, and also the Opposition, get thoroughly into their heads that. some reforms may be extremely useful, but they simply have to be adjourned or put off altogether for the simple reason that the country cannot afford them. It is impossible not to be struck by the truth of what the noble Earl the Leader of the House said, only he confined his observation to this House. He said that in one breath, almost, people were complaining of the high taxation and at the same time asking for further expenditure. That is no doubt what is going on all over the country. The public in general and Parliament first think that reform is very desirable, and then they set to work to find the money. In some cases that is a proper way of proceeding, for instance when providing for national defence, on which our existence depends. But when we come to other reforms we have to consider the relative merits of the case, and, I think, balance what is the best thing to do: to impose heavy taxation or go without the reform for the time being. In fact, my Lords, we have to cut our coat according to our cloth. That is a lesson which I am afraid has been entirely forgotten. The rates particularly are beginning to weigh very heavily on the people, but I am not altogether without hope, although it is useless to preach economy just now, that we may in the near future come to some more sane ideas, and be able to cut our coat according to our cloth, not only with regard to local but also with regard to Imperial taxation.

LORD CLINTON

My Lords, I think we ought to be very grateful to the noble Earl the Leader of the House for the statement he has made, that the Government really intend to take up this question of the revision of local rating at the earliest possible date, probably next year. Our gratitude must depend, of course, on what the actual method of giving this relief to local rates is, keeping in view the grievance which local ratepayers complain of, and which I think is universally acknowledged. We hope that relief will be given in a method which will be satisfactory, particularly to rural and agricultural ratepayers.

The two chief grievances of which we complain have been constantly put forward whenever this matter has been discussed. They are, first, that we are required to pay locally a very undue proportion towards the cost of those services which are partially or entirely of a national character; and, in addition, that these rates are levied on what is vaguely termed real property, and consequently the real wealth of the country is to a very large degree exempt. That is, I think, the chief injustice of the position. The basis upon which rates are levied was pointed out very fully by the Royal Commission on Local Taxation, but those grievances have been intensified since that Commission reported by the enormous increase of expenditure which has taken place since that time. Every year new duties are being placed upon local authorities, and every duty carries with it increased expenditure and consequent increased burdens upon the already hard-driven ratepayer, During the last ten or fifteen Years the subventions from Imperial 'funds have increased, but they have by no means kept pace with the enormous increase of expenditure.

The noble Earl, Lord Dunmore, in bringing forward this Motion, dealt with the enormous sums we have to pay both for local and Imperial taxation, and with the rating for all purposes. But I should like to put before your Lordships two figures to show the increase of the particular rates for what are termed national purposes, and also the amount which we get from Imperial funds to meet them. Poor-law, police, education, and main roads are, I think, universally regarded as of a national or semi-national character. The total cost for the year 1906–7, the last year for which we have the full returns, was £14,500,000. Towards that we obtained from the Imperial funds a total of £18,500,000, leaving £26,000,000 to be paid out of the local rates, a proportion which we believe to be entirely unfair. While the total cost for these particular purposes leas increased since 1889 from £17,000,000 to £14,500,000, the Imperial contribution has increased only from £4,000,000 to £18,000,000, so that we are considerably worse off than before.

But the real significance of these figures is brought out when we can show the enormous increase in rates. In 1889 the average rate for England was 3s. 8d. in the £, while in 1907 it was 6s. 1d. That means an increase of over 60 per cent., although during. that time there had been a considerable increase in rateable value; but that increase in rateable value has not nearly kept pace with the increase of the amount of money we spend. The increase in the rateable value is 37 per cent., whereas the amount we spend has increased by 60 per cent. I think that shows that in some degree at all events we are living beyond our means. The Royal Commission on Local Taxation—and I speak with some diffidence on this point, because the noble Lord, Lord Balfour of Burleigh, who presided over that Commission, is going to follow me—suggested, with regard to the increase of expenditure on national purposes, that an additional fixed giant should be given in aid of local authorities. The suggested amount was a large sum, something short of £3,000,000; and while they had a very strong case for advising that grant in the year in which they reported—nine years ago—the case is much stronger now. We have, as I have shown, made enormous strides in the spending of money, and the grant then proposed would be quite inadequate to meet the case at the present moment, and would be vastly inadequate, I am certain, in the near future.

I doubt very much whether a system of fixed grants can be in any way a solution of these difficulties. I do not think they can be regarded as a satisfactory method. I am aware that a grant varying with the expenditure is open to still stronger objections, as obviously it must lead to extravagance if the local authority can put their hands into the bottomless purse of the Imperial Exchequer. But a fixed grant has an inherent objection of its own, for while it may be adequate for the immediate purpose intended in the year in which it is given, expenditure increases so rapidly that it soon becomes quite insufficient for the purpose. We see that very clearly in the grants under the Agricultural Rates Act. They were nominally one-half of the agricultural rates then paid—I think 1s. 1d. in the £. At the present day that sum is not nearly one-half of the rates, and as a matter of fact the increased expenditure of local authorities has swept away from the agricultural ratepayer practically the whole advantage which that Act gave him.

It was proposed at one time that the taxation of the country should be raised according to ability to pay; but that was a legislative proposal which I do not think was ever carried out or could be carried out in practice. It dates, I think, from the days of Queen Elizabeth, and just as a chance it has left the rates mainly to he raised on real property. In those days real property was the chief, if not the only, source of income; but since that time the centre of wealth has shifted altogether from the owners of real property, and is much more centred in the hands of the owners of personal property. While the standard of ability to pay cannot be accepted as impracticable in the working out for ordinary purposes of rating, I should like, with your Lordships' leave, to refer for one moment to the system as we now adopt it. Of Imperial taxation, for every £100 raised 17½per cent. comes from rateable property and 82½ per cent. from other sources. Now we may presume that that is a fair system. If it is not a fair system it can be objected to from year to year. I take it that it is a fair division, and one which fairly shows the different classes of rating. But in local rating the position is almost entirely reversed. From figures calculated in 1901, which probably are not seriously different now, out of every £100 raised for local rating, 71 per cent. was raised from rateable property and only 29 per cent. from other sources. If the ability to pay as taken from the standard of Imperial taxation is correct, the figures I have given for local rating show that real property for those rates is paying a sum three or four times greater than it is entitled to do. I think that shows that a real grievance exists in the matter, and that there is good ground for some change.

I do not know what solution may be in the mind of the Government when they come to deal with this question, but I do think that the system of grants in aid from the Exchequer are unsatisfactory, whether they are in the form of fixed grants or of varying grants. The only solution which I think has been put forward—I am not quite certain whether it was supported by the Royal Commission or not—is that the Government should take over the expenditure, and with that expenditure the whole or a large part of the local control of a great many of these national duties. They have done so already, I think, in the case of prisons with a perfectly satisfactory result, and I do not see why the same process should not be applied to other national duties, such as the care of lunatics, the cost of the indoor poor, the police, reformatories and industrial schools, and other things. I do not believe it will be possible to take over the control entirely of education or of main roads, but I do believe that they might take over a very much greater control of these things than is done at present, and 1 do not think any strong objection would be raised to their doing so if we got equivalent relief from rates. There can be no doubt, from what has been said on this subject in this House and in the country, that the question of relief of local rates is really a burning one, and we do look to the Government to go closely into the matter and endeavour as far as possible to arrive at a solution.

LORD SHEFFIELD

My Lords, this debate has opened a very large question and has ranged over very wide ground, and it would be quite impossible in an evening's debate to touch upon all the questions raised. The noble Earl who opened the debate, though the peg on which his speech hangs is a Motion for foreign returns, allowed the bulk of his speech to have reference to the one case of London. I do not think that the House is so much interested in London as in the general question of the relation between rates and taxes. But I will say this to the noble Earl, that I think he is perfectly right in saying that London has been very badly treated in the distribution of Parliamentary aid in the relief of local obligations.

I would like to mention the operation of the Education Act of 1902. There was then an aid grant which was intended to work up to nearly, but not exceeding, 10s.per child. Owing, however, to the extremely intricate adjustment by which that grant was to be distributed, and which I will undertake not one person in this House could repeat correctly, and very few could remember approximately, London, though spending more per head on the education of its children than any other locality, was receiving nearer 6s. than 7s. per child. 'I he bulk of the country was receiving nearly 10s. a child; that is to say, the local authority, which showed the greatest willingness to conduct the education of its children on a liberal scale received a very much smaller grant per capita than those who were not so generous. I entirely sympathise with those interested in London government who protest against that unfair treatment. I am glad to see that the London County Council are congratulating themselves on the expectation of receiving very soon £200,000 a year from the operation of the Budget. They are the more pleased to welcome that accession of income inasmuch as in their pamphlets and documents which helped them to win the elec tion they put it as a probable result of this tax that something, like only £30,000 would be raised from the whole country. At any rate, they must be happy that their prophecies have proved wrong in that respect.

The debate has travelled to-night to the general question of the incidence and the proper burden of rates. I think people are too much in the habit of getting hold of a phrase and thinking that it is an argument. They say that services which are national ought to be paid for from national funds. Then comes the minor premise, "This, that, and the other services we perform are national"; and the conclusion that follows is "Those services should be paid for from national funds." There is not any service rendered in this country which cannot be looked at from the national and also from the local point of view, and I do not think you get any further by using that phrase. The essence of the question of where the burden of rates should fall is, Who has the right of directing and determining the scale of the expenditure? Take education, for instance. Local authorities have wide discretion. They may settle the scale of salaries to the teachers and the class of teacher they employ; they may decide to employ a highly qualified teacher, or they may decide to employ a less qualified teacher; and it is clear if they settle the scale high or low they use their own discretion. If you had a Government system I am afraid the standard of education in the better districts would be very materially reduced, because the Government would not take upon itself the burden of conforming to the liberal idea of education that is at present carried cut in the better districts. I tremble for what would happen in Scotland, with their liberal ideas of elementary and general education, if they were subject to a rigorous Treasury which would cut them down to the standard which has satisfied a backward English county. I think you must let the people who settle the policy be responsible for the substantial payment. I do not mind the grants being Parliamentary ones if they do not injure the principle of local self-government, but I agree with the noble Lord who has just spoken that there is great mischief in subventions. Either the people think it is not money which they are paying and therefore it encourages extravagance, or it brings with it an excess of Governmental interference. I am not desirous of Governmental inter ference from Whitehall in our local self-government. I believe in trusting largely to the local authorities, and I think every time you come to the Treasury you put a fetter upon yourselves. So much for the question of national services and national aid. I say that the test is local management and local financial responsibility, and I am not anxious to diminish the initiative and freedom of local government.

In these debates we are apt to drift into a conflict between urban and rural authorities. The noble Lord who spoke last touched on the operation of the Agricultural Rates (Relief) Act. It is perfectly true that while the Government relieved in perpetuity all agricultural land from the obligation of being rated beyond one-half its value, that was a permanent concession given to agricultural land by the ratepayer; that is to say, the ratepayer occupying houses, and railway companies and other business enterprises, had to bear the whole burden of any increase of the rate. The Government subsidy was calculated upon the then rates falling upon different classes of property. Since then we know that of the various services which have been called into existence the heaviest of all the burdens in rural districts has been the Education Act of 1902. I think I am speaking within the mark when I say that that Act has imposed from a sixpenny to a nine-penny rate throughout the country. That has been practically an entirely new rate. The effect of the Agricultural Rates Act has been to charge the house occupier, and, as I said, industrial enterprises, such as railways, docks, canals and mines, which, though connected with the land and therefore rated, are industries, with the burden of all the increase of cost. That, I think, works very hardly. I agree with the speaker who said that we ought, if we can, to consider the ability of the person who pays the rate or the tax to bear the burden. In my opinion if any person has a claim to alleviation from the burden of the rates it is the small occupier of a house—the working man. Every one in this House will agree that the real burden of the rate upon agricultural land does not fall upon the occupier; it falls upon the owner. We all agree, of course, that a farmer taking a farm asks as his first question whether the rates are high or low, and he puts the rate and the rent together as one sum that he will have to bear if he takes the farm. I may say, in passing, that the burden of the rates on the farmer is very greatly exaggerated. I have worked it out very carefully, and I undertake to say that on the whole turnover of the agricultural interest in the United Kingdom the rate is not three per cent. of the whole cost of production of the agriculture of the country. It is really quite an infinitesimal quantity.

The noble Lord made one great omission in his speech. Whether the fact was not present to his mind, or whether he had not elaborated his figures, I do not know. But any one who talks of rates in this country makes the greatest mistake if he does not sever the rates in the rural districts from urban rates. The great increase that has taken place in the rates has been in the urban areas. A large amount of those rates represents expenditure in populous districts for great social improvements, sanitation, better paving, lighting, clearing of slums, and so on. Of course, even in rural districts sanitation, proper water supply for villages, and all that kind of thing, have made demands; but we know that the great increase of rates has come about generally in urban districts. Another thing you must bear in mind is that the burden of the rate on agricultural land is in substance a charge upon property and not upon industry. When you talk about shifting conditions you must recollect that it is right that property the value of which has increased largely with the industry and prosperity of this country should bear a large share of taxation for local purposes.

But the burden on industry is another thing, and if we are to legislate in the way of the relief of rates we ought to legislate in such a way as to relieve the pressure of the burden on the small people—the resident occupiers, the cottagers, the small shopkeepers, and other people of the kind who do feel the burden of the rates. I agree that even here there is a great difference between the apparent and immediate incidence and the ultimate incidence of the rate. It is perfectly clear that a Bond-street shopkeeper who pays a very high rent and a very high rate does not pay that rent and rate himself. He would not take a shop in Bond-street unless he knew that he would there find a class of customer to deal with him at prices which cover the high cost of the rent and the rates of his house. therefore in talking of these things you never can put your finger exactly on the spot where the burden ceases or on the man who pays it. We are all of us trying to pass our burdens on to our neighbours; some succeed, and some fail; but he would be a hold man who could say that he could point to the first bearer who had succeeded in passing it on. When we talk of the great increase of the rates we must bear in mind that that increase has been much more urban than rural. All these questions are of the greatest difficulty and the greatest complexity, and if the Government intend to deal with them next session, I think they will need to have a session equal in duration to that of last year and consider no other business at all, for the questions raised will touch the Poor-law and go to the root of the whole of our social life. It will not be enough to give time only; it will be necessary to give a great deal of knowledge and thought also to the matter.

I have some sympathy with the noble Earl who spoke from the Cross Benches (Lord Cromer) who said we were apt to rush cheerfully into expenditure before we knew where we should find the money to meet it, and I was struck with what was said by the noble Earl who introduced this debate, by the noble Lord who represents the county councils, and by others. They spoke with censure of Parliament passing Bills involving great additional burdens on the rates without considering where the money was to come from. But, my Lords, I have recently seen these various Bills go through—Bills for police superannuation on a higher scale, for a police weekly day of rest, and all that, one of them moved, I think, from the opposite Benches and passed without a word; and I venture to say that although your Lordships have no control over finance, still you have control over legislation, and I have not heard a word of objection from the other side when these Bills putting burdens on the rates have been brought in, or any Motion that the Bill be read this day six months.

LORD WENLOCK

I opposed as strongly as I could the Police (Weekly Rest-Day) Bill on behalf of a borough.

LORD SHEFFIELD

The noble Lord is perfectly right, but I am afraid he met with no response. As I say, the greatest burden thrown on the rates in the last few years was the burden imposed by the Education Act of 1902. The noble Lord and his friends rushed joyfully into that expenditure, and when they went down to their counties they were equally delighted to give the benefit of a large public expenditure to their friends of the Voluntary schools. You must not, therefore, complain so much now when you have been parties to the policy. I dare say some of you in your hearts do not like this policy of liberal expenditure for public objects, but the misfortune is that at the present day you dare not say openly that you dislike it. These things are popular, and it is very difficult to get any politician, on whatever side of the House he may be, to take up a strong opposition to a thing which he believes is popular. You will offend the constitutents of your relatives or your friends whom you want to get into the other House, and so you all run away. You say, "Let us associate ourselves together and not raise our voices in opposition to this expenditure." One or two noble Lords do, but they cry in the wilderness.

We are going to end this debate with a Motion for Papers which I suppose will be granted. May I say I do not think these Papers will be of any use to us? I can quite understand carefully-prepared tables of finance being of use, even from other countries, but the finance of other countries is so different that unless you go into it more deeply then any Parliamentary Paper will do you will get nothing of great profit. In Germany the local authorities get a share of the Income Tax. Whatever Income Tax is put on by the central Government, so many pennies in the pound are added, up to a certain point, for local expenditure. In America you will find that practically the whole cost of education is borne locally. In Germany, again, the bulk of the cost of elementary education is born locally. All these things are so different and require so much knowledge that really you ought to get a Royal Commission of the most dispassionate, statistically-minded, and well-informed people before you could get a Report which would be of much use. Probably the newspapers would do it better than any Government, because the newspapers pitch into one another. If one newspaper misrepresents the facts on one side, the other side will show it up; and I think from the public Press you might elaborate something useful out of the criticisms passed week by week. But I do not think this Return will do a bit of good. Still, you can turn the Government statisticians on and they will give you what you want.

LORD DENMAN

They have not said that they were going to give it.

LORD SHEFFIELD

I thought they were preparing tables. I am very glad to hear they are not going to give it; there will be fewer Blue-books thrown at our heads: This question is so intricate and difficult and involves so many Second Reading speeches, every Member of the House taking up the point in which he is interested, that I do not think we are making any material progress. We can only take one small part of the question at a time usefully and direct our attention to some particular detail. To ramble over the whole field and talk of the grievances of London people and the grievances of agricultural people is so wide and so wild that I do not think we get any great advantage.

LORD BALFOUR OF BURLEIGH

My Lords, the noble Lord who has just sat down began his speech by commenting on the wideness of the subject we have before us, and be gave your Lordships at the end of his speech some very sound advice as to talking on one part of the subject at a time only. I am not quite sure whether his speech tended to narrow the discussion or not.

LORD SHEFFIELD

I merely followed the several speakers and criticised them.

LORD BALFOUR OF BURLEIGH

I was going to say that there has been no speech in the debate which dealt with so wide a variety of subjects or more widened the area of discussion than the speech of the noble Lord who has just sat down. I would like, before I go further, to associate myself with the compliment paid to the noble Earl who introduced this subject. I think any one who listened to his speech must have realised that, so far as regards the part he took up, he had thoroughly studied it and learnt his case. It seemed to me to be an extremely cogent case on the point with which he chiefly dealt.

No one knows better than I do how very large and complicated a subject this is. Before I sit down I shall touch on one aspect of it and venture to hope that I shall make at least one practical suggestion. But, as I say, it is a very complicated subject, and, as the noble Lord who just sat down said, it is a subject which cannot be dealt with within the compass of one speech. But, my Lords, it is a really important. Subject, and one that is worth consideration. I believe there is nothing which would be more fraught with benefit to the people of this country than that it should he studied, and studied, so far as it is possible to study this question, in an impartial spirit. With one remark of the noble Lord I cordially agree—namely, that the man who is to be mainly considered is the small man who lives in a house in a populous area. If you increase the burden upon inhabited houses by the value of the house you certainly will prejudice the poor man at the expense of the richer one.

But if you are going to relieve the humbler man, do get rid of the system of compounding. Do let the poor man know what he is paying. At the present time, by the operation of the system of compounding, he thinks that everything which he pays to the landlord is rent, and is put into the landlord's pocket. He sees the rent going up, and he thinks the landlord is selfish and grasping, and is putting a burden upon him for the benefit of himself. If there is one reform in this country more needed than another it is that, even if the rates are paid through the landlord, the sum should be gathered from the tenant in such a way as to show the tenant what he is paying for rent and what he is paying by way of rates for the services by which he is benefited. That is the one thing which I think everybody who has studied this question, whether from the imperial, local, practical, or social point of view, is absolutely agreed upon. I do hope that point will not be lost sight of if we are going into the reform of local burdens of taxation.

In the course of this discussion grievances of various kinds have been touched upon. The noble Lord, Lord Clinton, was not quite accurate, I think, in saving that rating is all upon real property. I think I am right when I say that personal property includes leaseholds. Now leaseholds are rated, and, therefore, the real distinction in this matter is not between real and personal property, but between property which is movable and property which is immovable —that is practically, as we know it, property which is rateable and property which is not rateable.

There are also complaints from ratepayers in general that they are too much burdened, and that too much is put upon them in proportion to those who own this non-rateable property. There are complaints also among special classes of ratepayers in the same district. There are complaints and discussions between urban ratepayers and country ratepayers, and there is also the question, which was touched upon in the course of this debate, as to the grievance between urban ratepayers and the owners of urban lands. But I am not going to enter into these topics. They are a fertile source of discussion, but I venture to think that too little has been made by some of the speakers of the distinction between various kinds of rates. One noble Lord behind me spoke of an average rate of so much, but there is nothing more fallacious than averages in this matter. You have to look at what makes up the rate. If you say that the average of country rates and urban rates is so much in the pound, it is a most misleading and fallacious statement, because in the larger sum there are a great number of services rendered and paid for which are not done for the man in the rural area. Let me give two instances which are at the extremes as between what are called national and onerous on the one side, and local and beneficial on the other. No one can say that a rate for the supply of water, or of drainage, is anything but a payment for a service rendered. On the other hand, a poor rate, is, perhaps, in its essence absolutely onerous, and though the effect of it and the amount of it are largely influenced by local policy, one can hardly say that either this or the payment for education is other than really a national service and the carrying out of national policy. You cannot, however, lay down a definite rule for all cases and say, "This service is national, that is local, this is onerous, that is beneficial." The two run into one another in such a way that you cannot form a catalogue or list of them and put on one side those which are national and those which are local. But all that is almost commonplace.

The point I want to pass to is, What is the remedy for the admittedly unfair circumstances under which we are living? May I venture to say with what pleasure I heard the announcement of the noble Earl the Leader of the House, that the Government really mean to take up this question. I am afraid I have not much influence, but to those who have I venture to say that if those who are in power and authority in the two Parties could establish and lay down some general principle we should not have this matter discussed as a contest between town and country, between the owner of personal property and the owner of real property, between people in different parts of the country. I would like to see some sound principle laid down which would be of practically universal application. An important point, to which I do not think sufficient attention has been paid in the past, is the way in which the national contribution is to be given to the local administration of services. Everybody admits that it must be increased. But the danger is that, if those who are responsible for local administration find that the more they expend the greater will be the national assistance they will receive, a direct premium will be placed upon extravagance. That must be avoided. Personally I do not like the system of assigned revenues. I do not think it fair to the poorer localities. As to the suggestion made by one noble Lord that the Government should take over more services I do not think that can go much further than it has gone. For my part I would rather see the services efficiently conducted locally. It is much better for the locality, and infinitely more likely to tend to making ways and means meet each other, and to local needs being supplied. On account of the system under which the local revenue is raised, it is unfair to one class of property, and. I venture to say you cannot have anything in the nature of local Income Tax or anything of that kind. You must get the assistance out of the Imperial Exchequer.

My Lords, the problem is how to be fair to the locality without risk of undue extravagance at the expense of the National Exchequer. It seems to me that the only way in which you can do it is to find some way of estimating what is the necessary minimum cost of any one of these services, which are partly national and partly local, in a given locality. This is no new point. This was, I frankly say, a fad of my own, and if any one will pay me the compliment of looking at the separate recommendations which I put into the Local Taxation Commission volume he will see there in full how it is worked out. Briefly the theory is this, that the contribution which is to be given from the central authority must have considerable relation to the necessary cost of the service in question. This applies whether it is poor rate, or education, or such a matter as police; and it ought also so to be given as to afford a lever to the local authorities for improving local administration, both in efficiency and in economy. The only way that I can see of effecting this is by giving block grants, not by means of assigned revenue or by a payment once for all; but by a payment set for a period of years, to be revised according to changed circumstances and to have distinct relation to the ability of the locality to bear the burden. It may be difficult to test what is the ability of an individual ratepayer, but the ability of a locality is very easily ascertained by taking together the amount of the valuation and the population. You will find, if you look into it, that this system has this curious result, that it, gives more to the poorer localities, whether they are poor because they are densely populated localities or whether they are poor on account of the sparseness of their population and the low valuation. What I suggest is that it should be in all cases found out, as can easily be done, what is the average minimum expenditure necessary in any district for the due discharge of these services. When you have found out what is the certain minimum expenditure necessary in any district and the ability of the district to hear the burden, then a. test of administration can be applied by seeing whether the service very much exceeds the average cost or not. When it exceeds the average cost there should be a less contribution from the central authority in so far as that excess over the average cost was due to maladministration.

It is, as I have said, difficult to deal with this complicated matter within the limits of a short speech, and. I would, therefore, suggest to the Government, or to any one interested in the subject, that they should look at the arguments and the calculations and the tables in the Report of the Local Taxation Commission to which I have already referred. What we all want to do is to prevent a district such as West Ham being overburdened on account of the density of the population and the comparative poverty of the inhabitants, and to take care that districts like the western isles of Scotland are not overburdened owing to the very opposite circumstances. You should see that the valuation of all districts is made upon something like a comprehensive and fair scale. It is perfectly obvious that if you leave the valuation to the district itself they will lower the valuation for the purpose of showing how much higher in the pound the rate is. You can lower a. valuation to such an extent as would show that 20s. in the pound is not more in one district than 8s. or 10s. in the pound in another. So long as you have no national system of valuation you are liable to this difficulty, that you place a premium on the locality to cut down its valuation as low as it. can. No one is more aware than myself how imperfect and fragmentary the remarks are that I have made, but I am most anxious that this aspect of the question should be considered, and I have been encouraged to bring it before the notice of those interested mainly on account of the promise we have received from the Leader of the House in the course of this debate.

LORD DENMAN

My Lords, there is no member of your Lordships' House who speaks with higher authority on this question than Lord Balfour, and certainly the suggestions he has made in this debate or at any other time carry the greatest weight, and I will undertake to convey the points he has raised to-day to my right hon. friend the Chancellor of the Exchequer. I much regret the absence from the Government Bench of my noble friend Lord Fitzmaurice, whose wide experience and intimate knowledge of local government naturally entitle him also to speak with great authority, and would have enabled him to make an adequate reply to the observations of the noble Lord. All that I can attempt to do myself is to give some idea of the attitude of the Treasury in this matter, and to endeavour to reply to one or two of the criticisms that have been made against the Government.

So far as I have followed the debate, it seems to me that it has disclosed a considerable measure of agreement as between both sides of the House. We are agreed for instance, that the present system is entirely unsatisfactory; we are agreed that it stands in need of revision, and that the relations of local and Imperial taxation require re-adjustment. The present system is unsatisfactory because it is a system of doles, because it is a haphazard system, because it is inequitable, and because it does not conduce to economical adminis tration. For example, I am told that a penny rate on the United Kingdom would result in about £1,000,000 being raised. But supposing that a grant of £1,000,000 was made from the Exchequer our experience goes to show that that would certainly not result in a corresponding reduction of the local rates. Then there is confusion in keeping the accounts and inequalities of rating. Rich authorities with high rateable value and high local expenditure get an undue share, which ought in justice to be given to poorer ones. Then there is municipal indebtedness, to which several noble Lords have referred. I have one or two figures to show the very high rate at which this indebtedness has increased. In 1902–3 the total amount of outstanding loans of local authorities in England and Wales, other than the Metropolitan Water Board, was £370,607,493. In 1907–8 it was £455,522,578. These, I think, are rather alarming figures, and do give cause for serious and anxious consideration.

THE MARQUESS OF SALISBURY

Might I ask the noble Lord whether the figures he has quoted appear in any Return, or whether he is doing us the service of giving us original figures which we cannot otherwise obtain? I only ask because I have not got them quite accurately down.

LORD DENMAN

I am happy to tell the noble Marquess that this Return was presented a day or two ago in another place, and, if he desires, I think it can be presented to your Lordships' House. There will be no difficulty whatever in getting it.

THE MARQUESS OF SALISBURY

I am much obliged to the noble Lord.

LORD DENMAN

The noble Earl, Lord Dunmore, in his rather interesting speech, adopted a somewhat novel way of taking the Government to task for the indebtedness of the country, because he lumped together municipal accounts and the accounts of the Imperial Exchequer and then said, "Look at what a terrible result you have arrived." But I would put it to him that we are not directly responsible for the alarming rate at which municipal debt is increasing, and I would remind him of the record of the Government with regard to the National Debt. Since the Government came into office the National Debt has been reduced by some thing over £40,000,000, and there is a provision in this year's Budget for a further £9,000,000 reduction. I think that is really a. very creditable financial record for any Government to hold.

Then the noble Earl went on to attack us—it is rather a. familiar complaint—on the ground that Parliament had continued to place fresh burdens upon local authorities. I agree that Parliament has done so, hut, as my noble friend Lord Sheffield reminded the House, the Government of noble Lords opposite certainly did this to just as great an extent as, if not to a greater extent than, we have done. There was, for instance, the Education Act of 1902, which placed an enormous burden upon the rates. There was the Unemployed Workmen's Act, 1905, which also placed a very heavy burden on the rates; and it would be very easy for any one more familiar with the subject than myself to quote a number of instances Where Acts of Parliament of Conservative Governments have placed enormous burdens upon local authorities. If we have been sinners in this respect, I am bound to say that the noble Earl and his friends have been criminals of the deepest dye. Against that we may fairly also say that local authorities have frequently come to Parliament and asked for fresh powers which have considerably increased expenditure on their part.

I would like to remind the House that at present the grants given by the Treasury to local authorities are very high. In the last year for which 1 have figures available, 1908, they amount to no less than £20,630,000. I could give details of how that grant is distributed, but I do not think it is necessary at this stage of the debate. The position is not quite the same as when this subject was debated in your Lordships' House some two years ago, because since then we have passed the Old Age Pensions Act. Old people will no longer be maintained by the rates, and therefore will not be a burden upon them. In England and Wales the number of paupers fell from 229,474 on the 31st March, 1906, to 196,064 on the 1st of January of this year, which shows a decrease of over 33,000, and allowing for the increase of population, including Scotland and Ireland, the actual decrease. I should say will be well over 40,000, which will give a relief of over £300,000 a year to local authorities in the country.

Then there are the Land Taxes, half of which have been allocated, as noble Lords are aware, to local authorities. It is true that this year an arrangement has been come to whereby the Exchequer takes the yield of half of the Land Taxes that would have gone to local authorities and has given local authorities a sum of money slightly larger instead. It is also true that this year, and possibly for the next year or two, the yield of the Land Taxes may not be very high, but in years to come, when the increment value duty has fairly got into operation, this will yield a very considerable source of income, and I think the local authorities will enormously profit thereby.

One or two remarks have been made about the particular case of London. I could go into that in some detail, but I will spare your Lordships at this hour. I will only say that London has one-seventh of the population of England and Wales' and has one-fifth of the rateable value, so that the rateable value per head is nearly fifty per cent. higher in London than elsewhere, and there is little doubt that there is a corresponding different taxable capacity. That shows an advantage to London in this matter, if the circumstances of the particular cases of England and Wales and London were comparable, there might be some case for giving London the extra grant for which the noble Earl asked this afternoon. But I maintain that the circumstances are not at all comparable, and I do not think the Treasury would be justified in giving this concession. The fact has been ignored that the Government contribute considerable sums, as much as £10,000 to the Metropolitan Fire Brigade, £100,000 to the Metropolitan Police, and other contributions in lieu of rates in respect of Government property in London, and London has the further advantage of being the seat of Government in this country and practically the centre of the Empire, by which, I think, London indirectly benefits.

The noble Earl has a Motion on the Paper in which he moves for a Return. I am informed that it would he very difficult indeed to give the particulars he wants with regard to foreign countries. That is the information I have from the Foreign Office. Lord Belper also asks for information, but as he did not put his request on the Paper, I am unable to give a definite reply. I will, how ever, refer the matter to the Foreign Office, and I will certainly undertake to obtain the information if the Foreign Office are able to give their assistance in the matter. Then the noble Earl moves for another Return giving the financial relations in British possessions. As to that I have to say that there are great difficulties in the way of giving the returns for which the noble Earl asks with regard to the Crown Colonies, but my noble friend the Secretary of State for the Colonies will communicate with the Dominion Governments and will ask them whether they are able to furnish the information desired, in which case, of course, it will be laid on the Table.

Speaking generally, I think already there has been a good deal of discussion of this question, but it has not yet reached an acute stage like some of the controversies in which we have been engaged in the past two or three years. The noble Lord, Lord Balfour, suggests that both sides should endeavour to come to some agreement in this matter. I seriously hope that they may be able to do so, but I am bound to say I do see difficulties ahead. I think it is fairly obvious that pretty well every local authority in this country—all the spending authorities: county councils, town councils, district councils, and boards of guardians—will approach the Government. with a demand or request, as the case may be, for relief. It seems to me, if I may say so, that the taxpayer is a person who is entitled to a great deal of consideration in this matter. So far as I can gather from the remarks that most noble Lords have made, they all contend that burdens should be taken off the rates and placed on the Exchequer. The noble Earl, Lord Dunmore, appeared to think that ratepayers will have no opportunity of making their voices heard in this matter. My own opinion is exactly the contrary. It seems to me that ratepayers would bring pressure to bear upon Members of the House of Commons who would naturally urge the Government to do something for particular localities all over the country. I think very often it is the case that the ratepayers feel the burdens more acutely because a great many of them pay their rates in cash, while a very considerable number of taxpayers in this country pay their taxes in indirect taxation, in commodities like tea, sugar, coffee, and similar articles. It does seem to me, therefore, that when a settlement of this question is in sight the claims of the ratepayers will be urged with even greater force than those of the taxpayers.

The noble Lord, Lord Clinton, in the course of his very interesting remarks, suggested that certain charges should be transferred from local authorities to the Exchequer. I am bound to say that I think it will be necessary to approach any proposal of that kind for any sweeping transference of a charge hitherto borne by the rates to the Exchequer with the utmost caution; and I think, whilst a comprehensive survey of what are local and what are national charges must necessarily be undertaken, that above all it will be necessary for this Government or any Government that may deal with this matter to endeavour to hold even the scales as between the ratepayers and the taxpayers of this country.

VISCOUNT MIDLETON

My Lords, although I do not think we shall agree with quite all that was said by the noble Lord who has just sat down, we cannot but congratulate my noble friend who opened this debate with so admirable a speech on the announcement that has been made by the Government. There is a substantial grievance, and the Government tell us that they propose to deal with the whole subject next year, and that in the interval they are willing to furnish us with all the information they can. We attach great importance to that, because I am sure it will be felt on all hands that the advantage of to-night's debate has been to show a great deal of common ground between the two sides and no sharp division of opinion as to the rival merits of the ratepayers and the taxpayers; and so far as we can get the information for which my noble friend has asked, we shall certainly be advancing towards more common ground in the consideration of the question.

I have ventured to press upon your Lordships one point which I would mention again. I do think that all parties in this country are bound to use their influence, as far as they can, to arouse those who are responsible for electing public representatives to a realisation of the enormous expenditure which they are forcing on those representatives. Whether it can be done, as Lord Balfour proposes, by bringing home to individuals that they are paying rates, or whether in so doing we shall revert to a system which means an increased cost of collection, I cannot say; but I believe the noble Earl, who served longer than I did on the London County Council, will be of my opinion, that the enormous increase which goes on and which is not confined to one Government or to another is to be deprecated and that it is absolutely necessary that in agricultural districts some powers should be given, which I think are not now possessed in a good many county councils, to enable those responsible for the finance to check the otherwise perfectly legitimate demands, which conjointly mount up to so enormous a sum, by the various committees.

I have not risen to make a speech, but I do feel that the whole of this subject, just as with regard to the subject of national expenditure, is absolutely slipping out of our hands, and that economy has gone to Saturn and Jupiter, as Mr. Gladstone was accustomed to say, and I feel that local expenditure is following suit For example, may I say that three hours ago when I was sitting on the Finance Committee of the London County Council we were approached with three schemes from different committees between them amounting to a million of money. Not one of the three committees had any idea that another committee was going to raise so large a question, and not one of the three, until it was pointed out to them, seemed to think it necessary that some authority should weigh what would be the charge on the ratepayers for the next fifteen or twenty years if the adoption of all those schemes was sanctioned. They considered they were all admirable, and that each of them ought to be carried out in some form or another. I mention that because the subject is getting far beyond ordinary ken.

I want to make one reservation with regard to the speech of the noble Lord opposite. He pointed out that all Governments are guilty of throwing these charges on the ratepayers. I think there is a great deal of difference, if I may say so, between a large scheme deliberately thrown on the ratepayers with the full assent of Parliament, such, for instance, as the Education Act of 1902, and this constant frittering away of money with small Acts to which no attention is drawn. I cannot help hoping that your Lordships will set the example to the House of Commons by insisting on all Bills which do throw a charge on the ratepayers having some dis tinguishing mark on that particular portion of the Bill which creates the charge. That is no unreasonable demand, and it would have very considerable effect in rousing such guardians of the local purse as my noble friend, Lord Helper, and others, and it would call your Lordships' attention to what we are engaged upon.

THE EARL OF DUNMORE

My Lords, perhaps I might be allowed to express my gratitude at receiving the assurance which the noble Earl the Leader of the House was kind enough to give us in regard to the intention of the Government to deal with this question not later than next year. I trust that when His Majesty's Government do take up this matter they will very seriously consider the proposals put forward by Lord Balfour to-night, and which are contained in the Report of the Royal Commission on Local Taxation. I remember some two years ago studying his system of block grants for the relief of local expenditure, which had the merit of taking into consideration the ability of the district, to pay for the services required, and which is the only system I have ever studied which seemed to me to encourage economy in the local body and at the same time relieve districts in proportion to their ability to bear the burden. I do not wish at this period of the evening to enter into any of the rather controversial questions which Lord Denman raised, such as the reduction of the National Debt, which is largely an automatic reduction owing to the process of the Sinking Fund. In initiating the discussion this evening I pointed out that I did not wish to make a Party question of this, or to make any attack on the Government for their delay in dealing with this matter. After what the noble Lord has said I will not press my Motion. I am quite content to leave it in the hands of His Majesty's Government to give us all the information, as I am sure they will do, that is in their power.

Motion, by leave, withdrawn.