LOCAL GOVERNMENT (FINANCIAL PROVISIONS) (SCOTLAND) BILL. (Hansard, 27 April 1937)

§ LORD STRATHCONA AND MOUNT ROYAL

My Lords, this is another very important but I am glad to say non-controversial Bill. It makes the necessary provision for the continued payment of block grants to local authorities after the 15th of May next and embodies the conclusions reached for amendment of the method of distribution of those grants. When the present system of grants was instituted under the Local Government (Scotland) Act, 1929, provision was included in that Act for an investigation into the working of the formula for distribution of the grants before the expiration of the second fixed grant period which terminates at 15th of May next. This investigation has been carried out as required by Statute in consultation with the associations of local authorities in Scotland, and the Report of the investigation is included in the House of Commons Paper headed "Report of Result of Investigation Under Section 72" which was made available on the 1st of March.

The major purposes of the Bill are briefly to fix the amount of the Exchequer grant payable to local authorities during the next five years, to make provision with regard to the calculation of the grant in future fixed grant periods and to amend the formula on the basis of which the larger part of the grant is allocated 29 among local authorities. In addition it proposes to relieve the local authorities in Scotland, as from the 1st of April, of their liability to make payments towards the cost of unemployment assistance, a liability amounting to £745,000 per annum. The amount of the grant as fixed in the Bill for each year of the next grant period is £6,827,000. This is £600,000 per annum more than in the previous grant period and, as no account is taken in arriving at the General Exchequer contribution proposed in the Bill of the relief amounting to about £90,000 a year afforded to county councils by the taking over of trunk roads, it will be seen that local authorities in Scotland will be better off in the next fixed grant period to the extent of £1,435,000 per annum.

It will be remembered that among the reforms introduced by the Local Government (Scotland) Act, 1929, was the substitution for a large number of ad hoc grants of a single block grant to local authorities. The amount of that grant was to be periodically revised. For the first fixed grant period, that is 1930–32, it amounted to £6,127,000 per annum, being the sum of the discontinued grants, the loss to local revenue due to derating and £750,000 of additional money provided by the Exchequer for subsequent grant periods. The amount of the grant was left to be determined by Parliament, subject to the maintenance of a minimum ratio of General Exchequer contribution to expenditure of local authorities as a whole, the expenditure for this purpose being the total expenditure met out of rates and the General Exchequer contributions taken together. The intention was that the additional amount should be periodically revised according to the circumstances of the time. If there had been a general increase in local government expenditure during the period Parliament would be asked to increase suitably the General Exchequer contribution for the next period.

Under this arrangement the grant in the second grant period—1933–37—was fixed at £6,227,000, being an increase of £100,000 over the grant in the first grant period. During the next grant period the Exchequer contribution would normally have been increased if the existing unemployment contributions had continued by a sum estimated at £500,000, but if in Scotland adjustments in respect of unemployment contributions and trunk 30 roads were made on the same basis as in England there would have had to be deducted from the normal grant the sum of £745,000 in respect of discontinued unemployment contributions and the further sum of £23,000 in respect of the grant attracted by present expenditure on trunk roads to be transferred to the Ministry of Transport.

The reliefs given under the Bill additional to those which would normally have been given under the provisions of the 1929 Act represent a measure of special relief which will enable financial assistance to be given to the necessitous areas in Scotland broadly equivalent to what they would have received had they been in England although the items of expenditure which attract grant are substantially less. If the unemployment contributions and the sum in respect of trunk roads had been deducted from the grant during the third fixed grant period the proportion of grant to expenditure as laid down in the Act of 1929 would have been reduced. With a view to securing a continuance of a proportion of the special reliefs now given in future grant periods provision is made in the Act for a revised ratio of grant to expenditure. The ratio fixed which is 24.6 wall have the effect of securing the continuance of a substantial proportion of the reliefs now given.

As regards the allocation of the grant the financial scheme of the Act of 1929 is to secure by a series of steps that the assistance given to local authorities is according to need and the abilities of the areas to meet their needs. This is effected by the use of a formula which is related to population but which is weighted in respect of certain factors, such as children under five, rateable value, unemployment and sparsity of population. In the early years approximately one-third of the grant was distributed on the basis of the formula; in the next fixed grant period over one-half was so distributed. The broad effect of the increased weightings for unemployment and sparsity proposed in this Bill is to secure that the greatest relief goes to the areas where the need is greatest, the hard-hit industrial part and the sparsely populated counties of the Highlands and Islands. This result has been accomplished without prejudice to the interests of local authorities elsewhere in Scotland. Indeed, as will be seen from the White Paper, in practically every area the local authority will benefit 31 under the Bill to a very substantial extent.

The remaining objects of the Bill are, briefly, first, to provide for the mitigation of reductions in additional grants where there has been a fall in weighted population; secondly, for the allocation of certain portions of the grant within a county in respect of special rates; and thirdly, for the mitigation of the reductions in the amount of supplementary grant paid in respect of any area where it is shown that statutory reduction of one-fifteenth per annum causes hardship. It is not anticipated that there will be many such cases. The Bill also provides for a further investigation to be made into the method of distribution of the grant between counties and large burghs and into the method of allocation within counties before the end of the third or fourth fixed grant period. I should like to add that out of the total additional reliefs to be given to local authorities in the third grant period amounting to nearly £1,500,000, over £1,000,000 will be devoted to the necessitous areas. It is hoped that these very large additional reliefs will not only enable local authorities to reduce their rates but will assist them in improving their social services. I beg to move.