LOCAL GOVERNMENT BILL.

HL Deb 02 March 1948 vol 154 cc207-89

2.41 p.m.

Order of the Day for the Second Reading read.

LORD HENDERSON

My Lords, in moving that this Bill be read a second time, I would point out that it represents a major instalment in the sequence of local government legislation. The ground that it covers falls into five main parts, which I may briefly describe as: the new system of grants from the Exchequer to local authorities; the transfer of valuation for rating from local authorities to the Inland Revenue Department; the prescription of new bases for the valuation of small dwelling-houses; an entirely new basis for the payment towards local rates by railway, canal and electricity undertaking; and the payment of expenses to members of local authorities. Any one of these matters is of sufficient importance to justify a Bill to itself, but it is not unusual for such questions, all closely related to local government and falling to be dealt with in the same Session, to be included in a single Bill. These various matters, for the most part, are so complicated and technical, and so distinctive in themselves, that I think my best course is to take them one at a time, as they come in the Bill, and do my best to describe their major principles.

Part I of the Bill, being the new financial provisions for England and Wales, represents a new financial settlement of the relations between the Exchequer and local authorities. It is a "new deal" for local government. In the course of the last seventy-five years, since the Exchequer came to have a substantial stake in local government, there have been several such settlements. There was that of 1888, when the county councils were constituted and certain of the national taxes were assigned and allocated as being in aid of local revenues. Another settlement—of some interest to-day for the form that it took—was the commencement of agricultural derating at the depth of the depression in 1896 and its further extension in 1923. In 1929, with the total derating of agricultural properties and the three-quarter derating of factories, railways and canals, and the transfer of poor law and of rural highways to the county councils, came the block grants. The system of block grants must now be replaced, but it is right to acknowledge that it was a great and courageous advance. It sought gradually to distribute to local authorities, according to their need, more and more Exchequer money. Its famous formula was a test of the relative wealth or poverty of the different local authorities. Some of the factors in the block grant formula have naturally become out of date as a result of the great changes which these two decades have seen. The relief of the unemployed, for example, is no longer a responsibility of Poor Law authorities; and the whole of their remaining Poor Law functions will be transferred under the National Assistance Bill now before Parliament. Local financial responsibility for the hospital system, too, will be transferred to the Central Government on July 5. But the position cannot be met by any tinkering with the block grant system, if only by reason of the great change in the incidence of rates consequent upon the transfer to the Central Government of the two services which I have mentioned.

The total amount of the present block grants, including the temporary supplementary grants of the last three years, is about £57,000,000. The first estimate (based on figures for the year 1946–47) of the saving to local authorities due to the transfer of hospital and poor law services was £63,000,000. Thus, if no new Exchequer grants were paid in lieu of the existing block grant, the local authorities as a whole, according to the figures for 1946–47, would have gained £6,000,000. Later figures show that in the current year the cost of the hospital and Poor Law services to be transferred is likely to be about £16,000,000 higher than was anticipated—£79,000,000 instead of £63,000,000—so that what appeared at first to be a gain of £6,000,000 will now be a gain of £22,000,000. But this does not mean that each individual county and county borough will gain by the change. The richer authorities with well-developed hospital services gain substantially, but many of the poorer authorities who have in the past been unable to provide the same standard of hospital services, and who have received on account of their poverty larger block grants, will lose much more by the cessation of the block grant than they will gain by the transfer of the services. A new system of Exchequer grants is accordingly proposed in Part I of the Bill.

The present estimate of the total grant under Clause 2 of the Bill, based on figures for 1947–48, is £36,000,000, so that with the net gain of £22,000,000 arising from the transfer of services and the cessation of the existing block grant, the total gain of local authorities is now estimated at £58,000,000. This is £19,000,000 more than the earlier estimate, based on figures for 1946–47, of £39,000,000, which was made up of a net saving of £6,000,000 and a new grant of £33,000,000. In devising a new system of general grants-in-aid to local government, the cardinal fact borne in mind has been the great disparities in the financial resources of the various local authorities. These disparities it has been beyond the capacity of the block grants to overcome, for only a part of the block grant was distributable according to need. Another part was compensation for loss of rates on derating and of the old percentage grants which were swept away in 1929. It would, indeed, have been impossible to propose to distribute more Exchequer money according to need without having in prospect a centralised system of valuation as a guarantee that a sound test of local authority wealth or poverty was assured. Central valuation is the key to the whole scheme.

On the understanding that there will be provided by central valuation a sound system for measuring the local financial resources of each county and county borough council, the new grants are designed to assure adequate financial resources to all of them and thus effect a substantial levelling of rates. This will be secured by making each year to each county or county borough council whose financial resources that year are below the national average a grant from the Exchequer of an amount which will bring them up to the average—in other words, an equalization grant.

In brief, the scheme is as follows. To some extent, the adequacy of the financial resources of counties and county boroughs may be measured by looking at their repective rateable values in proportion to their respective populations; that is to say, the rateable value per head. But it is not a fully adequate measure, because not all kinds of people require local government services to the same extent. For example, an area whose population includes an exceptionally large number of children has a greater need for the expensive local government services than an area whose population mainly consists of adults. Similarly, an area which is sparsely populated finds it more costly to run services than does one which is financially comparable but more compact; the spread-out of the population inevitably increases the expense of providing and running services. Accordingly, in using rateable value per head of the population as a measure of financial resources in these grant arrangements, the figure of population will be "weighted"; that is to say, it will be increased along lines well tried in this country since 1929, by (a) counting the number of children under fifteen years twice and (b) adding to the figure of population for any county where the population per mile of road is less than seventy, one-third of the additional population which would be required to raise the actual population to the standard of seventy per mile of road.

It is by using this measure of rateable value per head of "weighted" population that the average financial resources of all counties and county boroughs in England and Wales will be found. For each individual county or county borough a figure of rateable value will be calculated which is in this proportion to its own "weighted" population; and this figure will be known as its "standard rateable value." If in any year a county or county borough has on this basis a rateable value less than its standard rateable value, it will be entitled that year to an equalization grant. The amount of the equalization grant will be calculated by crediting to the local authority an additional rateable value to bring its actual rateable value up to the figure of its standard rateable value, and by ascertaining that part of the local authority's expenditure which would have been met out of rates levied on this credited rateable value if it had been available to them. The amount so calculated is the amount of the equalization grant for the year. The effect is, broadly speaking, as if the Exchequer were a ratepayer contributing the amount required to bring the local authority's financial resources up to the average of the country.

The measures proposed in the Bill for improvement in valuations, and other factors, may conceivably lead in course of time to the position that fewer local authorities than at present will have financial resources below the average. But if that should happen, special provision ensures that the benefit will remain with the poorer local authorities. In such an event, the Minister will widen the powers of local authorities eligible for the grant, and will increase the amount of grant payable by fixing a datum line above the average rateable value per head of "weighted" population to the appropriate extent. The general effect in counties and county boroughs of all the proposed measures, and of the transfer of hospital and Poor Law services will be to reduce the rates. Some authorities here or there may, however, experience a slight increase. Accordingly, a transitional grant is proposed for a limited term of five years to guarantee a gain of at least the equivalent of a rate of 6d. in the £ in the first year. This grant will be scaled down in each of the following four years. The White Paper, Command 7253, estimates by references to figures for the year 1946–47 the joint effect upon particular places of the equalisation grant and the transitional grant. Such statements need always to be made with caution. Some of the estimates of expenditure were, necessarily, upon a very speculative basis. The amounts raised from rates relate to 1946–47, and the figures of population are those of 1946. The grants will, in fact, be calculated each year upon the facts of the year; and the Minister, in answer to a question by Mr. Turton on January 29, gave some revised estimates in respect of the year 1948–49. These are still estimates and they should all be regarded primarily as illustrations.

The equalisation grants and the transitional grants will be payable to counties and county boroughs. The councils of the non-county boroughs, and of urban and rural districts within the county, will feel the benefit of the grant and of the transfer of services in a reduced county rate. In addition, a measure of equalisation is secured in all county districts (whether or not that county receives an equalization grant) by a provision that the county council shall each year pay to each of its county district councils an amount per head of population to be determined by the Minister by reference to the aggregate of the equalization grant payable that year to county councils outside London. The amount so payable to a non-county borough or urban district will be twice as large as that payable, to a rural district, because of the extra highway and other services for which an urban authority is responsible. These payments will fall as a charge upon the county rate. As under the existing block grant arrangements, London will be dealt with on the same general lines but, with due regard to the features which are peculiar to London, by a scheme to be made by the Minister after consultation with the authorities under Clause 10.

In the past, substantial changes in local government boundaries have necessitated payments by a local authority benefiting financially by the change to a local authority suffering as a result of the change an "increase of burden." The settlement of this "increase of burden" has necessitated much expert and expensive investigation, and has not infrequently led to litigation between the local authorities. Since the new system of equalization grants will automatically assure to local authorities financial resources up to the average, it is proposed to put an end to the incubus of "burden" payments for all future local government changes. It is proper that I should tell your Lordships that, in the confidential discussions with the associations of local authorities which preceded the introduction of the Bill, the County Councils' Association and the associations representing urban and rural district councils respectively were opposed to this particular proposal, while the Association of Muncipal Corporations equally strongly supported it. The view of the County Councils' Association was that it was wrong that for the future a county council which lost territory to a county borough, but yet remained above the average of the country in its financial resources, should receive no compensation for the loss because of the abolition of "burden" payments. But ex hypothesi the county remains financially strong, and the change is being made in the interest of good local government. Therefore, I submit that there is no good reason why, in such a case, the change should be encumbered with any payment.

The only other provisions in Part I to which I need draw your Lordships' attention are those in Clauses 12 and 13. They are transitional provisions, and have been drafted mindful of the intention that the new National Health Service shall be brought into operation on July 5, 1948. They ensure the continuance until that date of the existing block grant arrangements for county district councils and voluntary associations; and the first year under the new arrangements will be a mixture of the old system and the new. Part II of the Bill relates to Scotland, and makes similar grant provisions. I do not think I need say more on them at this stage. My noble friend Lord Morrison will speak later in the debate, and he will deal with any points arising out of the Bill in so far as it affects Scotland.

The transfer of rating valuation from local authorities to the Inland Revenue Department is proposed in Part III of the Bill. This part can be seen partly as a corollary to the new grant arrangements. If the Exchequer grant is to be distributed on the basis of rateable value per head, it is clearly difficult to justify leaving the individual local authorities to settle the rateable values for their areas. Indeed, one of the objections which the local authorities, themselves, have made to the new grant proposals is that there is great dis-uniformity at the present time, and those local authorities who have done their job well and have valued properties strictly according to the law and practice of valuation will suffer as compared with those who have consistently undervalued the property in their areas. It is no new phenomenon that such practices may affect the finances of a district, because the present grants are to some extent based on rateable value, and the precept raised by the county council is also based upon it.

But, quite apart from this, the proposal is fully justified. Few people would contradict a statement that the present system of valuation leads to serious anomalies, not only between different districts but also between different ratepayers in the same district. But, of course, opinions differ as to the remedy. It has been argued that a solution can be found by transferring the responsibility for valuation from the minor to the major authorities, and this proposition, which is substantially the same as that put forward by the Central Valuation Committee, has been carefully considered. It would, however, constitute an upheaval almost as great as the proposed transfer to a central department, and it presupposes some degree of central control to secure co-ordination and uniformity. This problem has been considered on several occasions in the past, and in 1914 the Inter-departmental Committee on Local Taxation, under the chairmanship of Sir John Kempe, came to the conclusion that a responsibility of this character ought to fall on a disinterested central department.

It is a pity that the opportunity provided by the Rating and Valuation Act of 1925 was not taken as a means of bringing in this reform, but it is clear that it ought now to be done. A revaluation of all property is long overdue, and it is possible, though by no means certain, that it might be secured a little earlier if valuation were left in the hands of local authorities than if it were transferred to a central department. But the Government are quite clear that this would merely be putting off a day which is bound to come, and, in spite of all the difficulties which will attach to setting up a new organisation at the present time, they feel that this long overdue reform ought now to be instituted. I know some of your Lordships will have in mind all that has been said in recent months about the shift of functions from local to central government, with the consequent loss of interest in local affairs and discouragement to those who wish to give local public service, but examination of this point in the present context will show that it is really not relevant. Valuation for rating is in no sense an administrative job, and, in fact, any attempt to import into it the local interest which is so important in local administration inevitably leads to bad and partial valuation. It is a specialist's job, which needs to be carried out with some degree of central co-ordination if ratepayers all over the country are to be treated fairly.

Local authorities will still have the responsibility for deciding how much money to raise, with the valuation list as a basis, and they will be well rid of the onerous I and often distasteful task of adjudicating between ratepayers. Therefore they will be able to give more time to work which is truly of the character of the administration of social service. But, having said all that, I would point out that the Bill does what is possible in the way of preserving local participation by requiring local valuation panels and courts to be set up, according to schemes made by the major authorities, and these courts will be the first court of appeal from the valuation officer's assessments. Moreover, a rating authority will have the right to make objections and proposals in regard to any property in their area.

I will not go into all the details of the machinery for making first the draft lists and then the final lists, and for amending those lists at any time by way of proposal, because I think it is true to say that, generally, all this substantially follows the existing machinery—though with the modifications which should necessarily follow on the change from local to central organisation. But I should say, in concluding my remarks on this Part of the Bill, that the intention is to have the first new lists in the new system in operation for the rating year in 1952; otherwise the provisions in this Part can be brought into force by order of the Minister of Health, and the major step will, of course, be the change-over from the local to the central machinery, which it is hoped will be possible some time next year. The valuation officers will then be dealing with the day-to-day work on the present list, and, at the same time, preparing the new valuation lists.

This brings me to Part IV of the Bill, which sets out the new criteria for the valuation of dwelling-houses.

THE EARL OF MUNSTER

My Lords, may I interrupt the noble Lord for a moment? Before he leaves the subject with which he has just been dealing, can he tell us how long it is anticipated that the central valuation will take?

LORD HENDERSON

The noble Earl knows what is the provision in the Bill. The provision in the Bill is for the year 1951, or it can be laid over until 1952. That is the intention in the Bill. I think the noble Earl may accept it as a fact that the Government will do everything in their power to ensure that results are achieved by the specified dates.

At the moment, dwelling-houses, like all other rateable property, are valued according to the rent which a hypothetical tenant would be willing to give. This, of course, depends on the relative supply and demand, and it is notorious that, at the moment, and, indeed, in varying degrees, ever since the 1914–18 war, dwelling-houses, and particularly the smaller ones, are so scarce as to be capable of fetching extremely high rents in the open market. Matters were, of course, much better before the war than they are now, but even then the prospect of a revaluation, with the law strictly applied, led to its postponement, and a Committee, under the Chairmanship of Mr. Maurice Fitzgerald, K.C., explored allegations that substantial hardship would have been caused. It is now many years since the last quinquennial valuation, and the issue cannot be burked any longer. The Fitzgerald Committee, while pointing to the possibilities of hardships, did not advise on alternative methods of valuation, and, indeed, they were not asked to do so.

The method proposed in the Bill will, we hope, get over many of the difficulties and secure some reasonable measure of equity and uniformity as between ratepayers of dwelling-houses of various kinds and throughout the country, without being unjust to the owners of other properties. The method is complicated, and I do not wish to delay your Lordships too long with an elaborate exposition of it, since many of the points will no doubt become clear during the debate. Broadly, the basis is to divide dwelling-houses into three groups: the pre-1918 small house, the large house built at any time (both of which will be valued on 1939 rental values), and the post-1918 small house, which will be valued by reference to 1938 local authority building costs (described in the Bill as the "hypothetical 1938 cost of construction") and the value of the site. There is a sub-division of these post-1918 houses between local authority and non-local authority houses, which comes about simply because of the practical difficulty in dealing with the large variety of private houses. The difference is that whereas the cost of the site of a local authority house will be valued on 1938 levels, the site of the private house will have to be valued on current values.

I can assure your Lordships that there is no question of any discrimination in this. The reason is the purely practical one that there is plenty of concrete evidence as to the cost of local authority sites before the war but, as time goes on, it will be impossible for the valuers to keep in mind 1938 levels. The difference which this is likely to produce between two precisely similar houses—one a local authority house and the other a non-local authority house—can never be much, certainly no more than would be likely to be found under the present method, which depends on the "hypothetical tenant's" assessment and the relative rental values of the local authority and the private house.

I ought also to mention one other variation—namely, that all private flats built since 1918 will be valued on the rental level method, again because of the practical difficulty of dealing with them on an assessment of the cost of a whole block of flats and breaking it down to individual flats which might vary enormously in character and value. The Government do not claim that these proposals will produce the perfect panacea. They believe that the proposals will be workable and will produce with the minimum of hardship a great deal more uniformity and equity than does the present system. But it should be noted that the Government make these proposals on the understanding that a review of their working will be made before the second revaluation in 1957; and, if necessary, further adjustments can then be made.

Part V of the Bill deals with an entirely different subject. The problem of rating "extensive" or "tentacular" hereditaments, which are features of the various utilities and the railways and canals, is nothing new and certainly is not merely a consequence of nationalisation. The problem of dealing with the main line railways was tackled, to some extent, in the Act of 1930; but even when it put valuation in the hands of a central authority—as it did—there was still plenty of room for litigation, and there was still the extremely complicated task, involving many man-hours, of breaking down the cumulo of the whole undertaking to each separate hereditament and mile of railway line.

The same problem arises with electricity, and perhaps becomes underlined when an undertaking is managed as a national concern, so that if any part of it were valued separately on the profits basis, which normally applies to utilities, a completely unreal result would be reached. Moreover, local valuation of these larger utilities has always produced the anomalous result than an area which is fortunate enough to have, say, a large generating station reaps a, large rateable value. That means that its rate income is largely contributed toy the consumers of electricity in other areas, who might more properly be said to be contributing to the well-being of the undertaking than the local authority in whose area the station happens to be. Some parishes, indeed, have been in the position of having almost their entire rates paid toy such a station.

The object of this Part of the Bill is to get over all this by derating these hereditaments locally, and by requiring the British Transport Commission and the British Electricity Authority to make payments into a central pool which will be distributed to county councils and district councils according to their rateable value. The payments to foe made into the pool will toe based on rate payments in the current year, adjusted according to changes in the average rate throughout the country and according to a factor depending on the activity of the undertaking. These two factors correspond to the rate and the rateable value which would have varied the rates paid by these undertakings had they remained rateable locally. Obviously, in the cases to which I have already pointed, there may be a serious disturbance of local finances; and the Bill provides that county councils shall make temporary grants over a period of ten years to meet the most difficult cases. There is also a further clause which can be called in aid at the end of the ten-year period, or earlier if necessary, enabling county councils generally to assist district councils.

I turn now to Part VI of the Bill, which authorises the payment of allowances to members of local authorities and other bodies. As noble Lords will remember, this subject was examined by an inter-departmental Committee which was appointed in 1946 by the Minister of Health and the Secretary of State for Scotland, and of which my noble friend Lord Lindsay of Birker was the distinguished Chairman. This Committee, to whose work I should like to pay a tribute, presented a Majority Report, signed by ten members, and a Minority Report, signed by the eleventh member. It is on the recommendations of the Majority Report, which were accepted with modifications by the Government, that the provisions of this Part of the Bill are based.

Before explaining these provisions generally, may I refer to the underlying principles? The local government service makes many calls on the time and purses of those who take part in it, and it is entirely right that this voluntary service should entail some sacrifice. But the sacrifice can be too great when the proper performance of duties creates hardship, or the fear of hardship deters from entering into local government people whose service would be of benefit to the community. Local government is unrepresentative unless all members of the community feel that they can take part in it if they want to. Few people, to whatever political Party they may belong, will disagree with that proposition; equally, I think, most will agree that local government should not become a salaried service. This Part of the Bill accordingly provides for the one while avoiding the other.

Provision is made in it for the payment of allowances to meet travelling and subsistence expenses necessarily incurred in the performance of public duties, and for financial loss allowances. Travelling and subsistence allowances are already familiar in local government experience; they will be payable by the local authorities at rates determined by them, but not exceeding maxima to be prescribed in regulations by the Minister. The payment of financial loss allowances is a new feature and its purpose is to compensate the members of a local authority who, by the performance of their duties, have lost earnings which they would otherwise have made, or who have incurred additional expense to which they would not otherwise have been subject.

The amount of the payment is laid down in the Bill. It is not in any one period of a day to exceed 10s. where the loss is not more than half a day (four hours) or £1 where the loss is a whole day (more than four hours). The Bill makes it mandatory on local authorities to pay these allowances and, indeed, in the view of the Government, this is the only course to follow, since if it were left to individual local authorities to determine whether payments should be made to their members the object of making the local government service open to all would be stultified. It is not, of course, mandatory on members of local authorities to claim the allowances to which they will be entitled. Abuse is safeguarded by the power given to the Minister to make regulations providing for the publication, either in the minutes of the local authorities or otherwise, of details of payments made under the Bill.

The remaining provisions of the Bill deal with comparatively minor points, and with the machinery to be found in any Bill of this kind. I do not think I need delay the House any longer with them at this stage. There is, however, one further matter which I should perhaps mention. The new grant arrangements, and the provisions dealing with payments by the Transport Commission and the British Electricity Authority, are due to begin on April 1 next; and, indeed, so far as the grant arrangements are concerned, local authorities will receive substantially reduced block grant payments after that date if the new provisions have not come into force. Your Lordships will therefore appreciate the need for this Bill to progress as speedily as possible. I hope that the many amendments which have been made by the Government to meet criticism in another place will have met many of the points which would otherwise have been raised here, and will enable your Lordships' House, consistently with its responsibilities, to co-operate with a view to getting the Bill through all its stages in time, so that the local authorities may have a firm basis for their estimates prior to striking their new rates at the end of this month to provide local finance for the year beginning on April 1 next.

I commend the Bill to your Lordships as a measure of first importance in the matter of local government legislation. I believe it to be true of this House, as it has been said of another place, that local government is a passion with a minority of members and of profound concern to all of us. I feel that there will be general agreement about the urgent need for a Bill of this sort; I do not think there will be disagreement with its major objects. There will, perhaps, be argument on points of detail; but I trust that I shall find myself justified in hoping that a great measure of agreement will be shown upon main principles. I beg to move that the Bill be now read a second time.

Moved—That the Bill be now read 2^a.—(Lord Henderson.)

3.23 p.m.

THE EARL OF MUNSTER

My Lords, I feel quite certain that the whole House will be grateful to the noble Lord for his clear and lucid interpretation of the Bill. It is never easy to sponsor a measure for any Minister to whom you owe merely the obligation of representing his Department in this House, and to whom you have no responsibility for the policy which you are called upon to defend. In my time I, too, have been in that position, and have sometimes been asked to elucidate the incomprehensible, to defend even the indefensible and generally to maintain doctrines to which I was fundamentally opposed. I have a sneaking belief that the noble Lord, Lord Henderson, finds himself in that unenviable position this afternoon. Nevertheless he has exercised all his talents in an admirable exposition of this Bill—a Bill dealing with complicated changes in the financial relationship between the Central Government and the local authorities. I feel sure, therefore, that the House is grateful to the noble Lord for the detail which he has given in regard to various parts of the Bill.

As the noble Lord said, a new rating Bill to revise the current system comes as no surprise. A measure had been expected, as revaluation for rating purposes was long overdue. Furthermore, the State has now, under the National Assistance Act and the National Health Services Act, assumed functions which were formerly exercised by local authorities. Those two measures have been removed from the control of local authorities, and the burden of expenditure has been transferred direct to the State. I might remind members of the House who take an interest in local government that the Coalition Government issued a White Paper on local government. In that White Paper they recognised the need for a measure to revise the current system of Exchequer grants so as equitably to relieve and adjust the burdens of ratepayers. In addition, they laid particular emphasis on the necessity for alleviating the difficulties of the poor or poorer areas. It was, therefore, quite clear that any reorganisation would have to be accompanied by changes in the existing financial relationship between His Majesty's Government and the whole body of local authorities.

The Bill certainly seeks to amend the law in that respect; and it also introduces a new and revolutionary system for the valuation of dwelling-houses. As the noble Lord, Lord Henderson, rightly pointed out, for a number of years successive Governments have rendered financial assistance to local authorities to meet their current expenditure, and this, we know has been made by direct contributions, from the Exchequer. From 1929 this aid has been by the device of a block grant, which, since 1937, has been fixed at a definite percentage of the expenditure which is borne by the rates and, therefore, has been linked to the actual expenditure of local authorities. I always believed, and I believe to-day, that that system of financial assistance was the greatest single step that was ever taken in the equalization of rates, in the sense that no one person paid more for the use of any of the great national services, whether they lived in this or another part of the country. Under the Local Government Act, 1937, the grant was fixed at 22½ per cent. of the aggregate of the rate-borne expenditure and the block grant itself. Under this Bill, as the noble Lord pointed out, the grants are to be fixed by quite a different procedure. But if the new grant is expressed in the form of a percentage like the old block grant, I understand that it will work out at a figure of about 17 per cent., compared with the 22½ per cent. given under the old system.

The noble Lord told us in the speech with which he introduced this Bill that a reduction is necessary as there will be a net saving of many millions to local authorities by the transfer to the State of the expenditure under the two Acts which I have previously mentioned. But that does not alter the fact that by a reduction of the block grant itself the Treasury are saving a sum estimated at £10,000,000 which would have been payable to local authorities in any event, even after the transfer of the transferred services. Moreover, any alleviation of the rate burdens which have been equally borne by local authorities under those two Acts can be only temporary, for it will be more than swallowed up by the increased financial charges under the Fire Service Act of last year, and the Education Act of four years ago. The cost of the former Act is, I am told, uncertain. I do not know whether the noble Lord can give us any figures, but nevertheless the cost is bound to be heavy. The cost of the latter Act was estimated in a financial memorandum which accompanied the Bill during its passage through Parliament, and it was then estimated that the increased cost to be borne by the rates would be a figure in the neighbourhood of £30,000,000 a year, but in point of fact the figure is proving to be much higher.

Now if those two figures are correct—and they have not been contradicted—two factors of first-class importance must emerge: first, that the supposed savings under the two Acts I first mentioned will be more than absorbed and swallowed up in the increased expenditure under the two latter Acts (if I may describe them in that way); and, secondly, that the equalization grants under this Bill will not avoid the necessity to increase rates, as a much lower proportion out of national taxes will be paid in the future to all and every local authority.

The noble Lord told us in the course of his speech that, under the transitional payments scheme, local authorities will be receiving a minimum relief of 6d. in the first year, and subsequent annual payments will fall by one-fifth. That may well be so; but if the expenditure of local authorities rises appreciably, as it must, there will be, and there can be, no actual relief whatsoever after the first year of the introduction of the new payments as outlined in the Bill. I think your Lordships will realise that the expenditure upon existing obligations falling upon the local authorities under various Acts of Parliament is increasing year by year, and I hardly suppose that the Government could give any guarantee that in the course of the next few years further substantial and heavy burdens will not be inflicted upon local authorities. In fact, at this very moment your Lordships are considering a Bill of great importance—the Children Bill—which cannot possibly come into operation without heavy expenditure, half of which has to be borne by local authorities.

In addition, local authorities are still confronted with a steadily rising level of current expenditure, and post-war programmes of expansion still lie ahead. The local authorities have little power to check or control their commitments on all those heavy burdens. Is it really to be wondered at that the more seriously thinking authorities are perturbed over their position, especially when they recall that rates have risen by over 65 per cent. since 1937? If the benefits which the noble Lord endeavoured to persuade your Lordships were contained in this Bill are to be achieved, and are not to be of an entirely illusory character, is it not really time for His Majesty's Government to exercise all their abilities towards stabilisation of rates, rather than allow the present exorbitant rise to continue? The Government of which the noble Lord is a member have recently issued a call to the nation for a stabilisation of wages, but they appear utterly to have neglected the stabilisation of rates which, in themselves, have a large bearing on costs of production. Instead, they have devoted their efforts to the equalization of rates. In those circumstances, it is important that we should ascertain how such a scheme will function.

The noble Lord, Lord Henderson, will agree with me—in fact, I think he said so in the course of his remarks—that to obtain equalization of rate burdens certain conditions are all-important. There should be—there must be—equalization of the cost per head for the same services, and there should be equalization of rateable value per head. To achieve this it is vital to secure uniformity for rating purposes. If the Minister whom the noble Lord represents were really anxious to secure equalization in rates, one would have expected that fairness and equity would have been his guiding star. But let us see what is intended. The intention is that there shall be a payment of a Government grant in the form of rates upon a credited rateable value. That will have the effect—indeed, it can have no other effect—of lumping together and treating as wholly identical the different sets of services which are provided in different areas of the country. Short of the powers of reduction which are contained in Clause 6 of the Bill, and which any Minister would be reluctant to use, no account is taken of the differences due to extravagance in over-spending, to the inefficiency in administration or, above all, to voluntarily accepted services. I should have thought that the wiser course for the Government would have been to equalise the burden of inescapable expenditure; that is to say, expenditure incurred by local authorities under various Acts of Parliament. Surely it would be fairer to do that than to cater for the single services of any particular authority. I am anxious to know whether the noble Lord will tell me, in the course of his reply, how it was that the Minister came to include within this grant any service which depended entirely upon local initiative and local enterprise.

I pass to Clause 3 of the Bill, which interprets the meaning of a weighted population, which in itself is an essential element in the equalization of costs. Your Lordships will have noticed that a limit of not more than 70 per mile of road has been inserted. Personally, I believe that figure to be defective, for sparsity far less acute than 70 per mile of road has the effect of increasing the cost per head of a large number of local government services. Can the noble Lord, with all the influence he possesses, tell me that sparsity less acute than 70 per mile of road does not increase costs? In a table which was recently published in Hansard—to take only two examples—the Isle of Anglesey was shown with a population of 69 per mile of road and Norfolk with a population of 71 per mile of road. Under the formula contained in the Bill, Norfolk receives no weightage whatever for sparsity, and Anglesey very little indeed. Does the noble Lord really claim that the sparsity of population in either of those two counties results in no increase of costs per head?

Let us for a moment contrast the position under the existing Local Government Acts, which give weight-age at increasing scales for sparsity of less than 300 per mile of road, and so obviously give considerable sparsity weightage to Norfolk and Anglesey and to other counties in a similar position. The noble Lord, Lord Henderson, in the course of his remarks, told us that in a large county the activities are spread out and naturally the cost is more than in a small county where the activities are confined to a smaller space. I now turn to the question of equalization of rateable value per head. I think the noble Lord will agree with me that the equalization grant machinery contained in the Bill can only achieve equalization and not injustice if it is accompanied by uniform standards of assessment throughout the whole country. The proposals for the uniformity of values, I believe, require a good deal more explanation than was given by the noble Lord in the course of his Second Reading speech, for it seems abundantly clear that uniformity cannot be obtained until the year 1952. It was for that reason that I interrupted the noble Lord. If that is so, then for the period of four years during which these equalization grants will be paid the highly assessed areas must automatically be penalised and the lowly assessed areas be rewarded.

The time lag between the inception of the grant scheme and the coming of a new and uniform assessment arises in the main because of the Government's intention to abolish the existing valuation machinery and to substitute in its place an entirely new branch of the Inland Revenue. I should have thought that the disadvantages, in such a scheme as that are apparent. There must be a great increase in the staff, and that increase is required at a time when valuation personnel are actively engaged upon the Town and Country Planning Act of last year. Any assistance which might be forthcoming from the valuation officers of local authorities, would, I am told, be very slender, as in many cases those officers perform a dual function; and certainly the flexible source of additional help which might be provided through the employment of valuation firms will be less and less readily available. I am told that the professional bodies concerned with valuations made certain proposals to the Minister of Health for obtaining uniformity of valuation with the minimum of delay and in any case well before the year 1952. I wonder whether the noble Lord can tell me whether this was so, and if so, why it was that the Minister declined to accept their advice and adopt their suggestions. For central valuation is the key—as the noble Lord himself said—to the whole scheme embodied in the Bill.

Before I pass to the next question I want to deal with a matter which is indeed very complicated. I should like briefly to draw the attention of the noble Lord to the implications in the Bill upon the form of other grants which are paid by the Exchequer to local authorities. I understand that with many of these grants there is a formula for compensation for differences in rateable value per head. I assume that when the Bill becomes law, those grants will be revised and the formula will be entirely eliminated, for rateable value cannot be equalized twice over. If you have equalized it once and continue to value other grants on the basis of rateable value per head, it will again be penalising the ratepayers in areas with the higher average rateable value, and paying excessive subsidies in areas with a low rateable value. Remembering the action which the Minister of Health has taken and which is found in the Bill, I hope that the other Ministers concerned will notice the effects upon grants for which their Departments are principally responsible.

I turn now to deal with valuation of dwelling-houses which is contained in Part IV of the Bill. In future, there are to be four separate ways of valuing houses for rateable purposes. The first is the 1938 cost of construction plus the 1938 cost of site; the second is the 1938 cost of construction and the current cost of site; the third, the 1939 annual value; and lastly, the current annual value. Your Lordships will observe that instead of basing proposals upon a practical scheme of straight valuation of all property at current annual values, the Government nave adopted four distinctive methods which penalise many existing owner-occupiers, especially in the case of small dwelling-houses whose rateable value is bound to increase far more steeply that any other types of hereditaments. I have with me to-day a number of figures which I could give to prove conclusively that, apart from the variations between different types of houses, the Government's proposals involve considerable increases in the valuation of all small house property generally.

It is no good employing the argument which I think was employed by the noble Lord, Lord Henderson, that a general rise in valuations will involve a general fall in rates, and thus no extra or additional burden will be cast on the ratepayers. The point is that in future dwelling-houses will be called upon to provide a higher proportion of total rateable value in nearly every area of the country, and so the rate burden is shifted from other types of property the owners of which are probably better able to bear the burden than the owners of small dwelling-houses. I do not want to weary the House now with particular examples, but it is clear that, by using these four different methods of valuation, the Government have created anomalies between the owners of different proper-ties having the same annual value. These anomalies would not have arisen in any way if the Government had taken the far simpler course to which I have referred. I do not know whether the noble Lord and his Minister are prepared to think again, but I intend to help them on the Committee stage of the Bill by putting down some Amendments which will remove some of the more glaring and obvious anomalies to which I have referred.

The House will have noticed that there is a special scheme outlined in Part V of the Bill, by which the railways and electricity undertakings will in future pay a sum of money in lieu of rates. The manner of the assessment of these undertakings is certainly open to objection, as is also the distribution of the total sum. I want to direct my remarks in particular towards the assessment for the British Electricity Authority. The standard figure which is to be paid by that body is based on the assumption of electrical hereditaments in the current list. They are assessments which, for the most part, date back to 1934 and are therefore fourteen years out of date. The noble Lord, Lord Henderson, will agree with me that in each new valuation list the valuation of existing hereditaments, as for electricity authorities, has always shown a steep increase. In the 1929 list, the electrical authorities were assessed 35 per cent. higher than in the old list, and a similar rise was recorded in the 1934 list. I feel sure that the noble Lord would not doubt for one moment that, if there had been a new valuation list since the war, a further very sharp increase would have been recorded.

However, the electrical authorities are to have the privilege now of paying rates upon a pre-war assessment—an assessment which, as I have pointed out, is in many cases fourteen years out of date. There is, indeed, an additional objection. The Bill contains a formula for relating the payment of a lump sum in lieu of rates not only to the general level of rates themselves but also to the number of units of electricity sold. I have reason to believe that that figure and that formula err on the side of generosity towards a, nationalised undertaking, and are much to the detriment of the general body of ratepayers. Experience has shown that throughout the 1930's, despite a falling off in rates, the figure which was actually paid by electrical authorities increased in a much greater proportion to the number of units sold than the figure of one-fifth which is mentioned in Part V of the Bill. I feel that we have the right to call upon the noble Lord to give us considerably more information concerning the figure which is to be paid in lieu of rates by these two authorities—the railways and the electricity undertakings—and to say why the valuation is not based on a more up-to-date assessment by waiting until even 1952.

Lastly, I turn to Clause 131 of the Bill. Here I speak entirely for myself. Subject to proper safeguards, and to assurances that the body of ratepayers really require local authorities to provide and finance their amusements, I have little or no objection to the proposal. As the clause is drafted at the moment, however—and this is my only objection—the general body of taxpayers, through the hidden subsidy of the equalisation grants, may be called upon to finance local authorities in providing amusements for people in various areas of the country. Frankly, at the present time, when we hear a call for the stabilisation of wages, a reduction in profits and a reduction of costs, I believe that the infliction upon the general body of taxpayers of a further burden is something which your Lordships have to make quite certain is required before we pass that particular clause.

I apologise for keeping the House so long, but this Bill affects every ratepayer in the country. It is essential, therefore, that without being hurried we should give this Bill careful examination and thought. For the reasons which I have given it will be clear to the noble Lord that I do not view this Bill with enthusiasm. The withdrawal of the block grant and the substitution of the Exchequer equalization grant before completing the uniform valuation will fall heavily upon a large number of local authorities. I firmly believe that, sooner or later, the Government must face up to the necessity of examining the reasons for the steadily increasing burden of rates borne by local authorities. The spacious promises of rate equalisation and assistance to the weak areas indicate, to me at any rate, that the Treasury are finally resolved to limit their contributions to local authorities, and in future to throw any additional financial burden directly on to the shoulders of the ratepayers. I do not believe that the scheme and the proposals embodied in this Bill will revitalise local government, nor do I believe that they are founded upon a basis of fairness and equity. I am confident that when the facts become fully known the British people will receive a severe shock which, in time, will be recorded as a rebuff to the whole policy of His Majesty's Government.

3.59 p.m.

LORD MESTON

My Lords, I am sure that we all congratulate the noble Lord, Lord Henderson, upon the clear way in which he has explained this very complicated Bill. I myself feel that only a Senior Wrangler could really understand its full implications. As Euripides used to say: There are occasions when it is better not to be wise. I feel that the present is such an occasion—as, indeed, will become more evident after I have spoken. The elementary facts of the situation are known to everyone. The local authorities in this country derive their income from two sources—from the rates which they levy upon properties in their areas and from grants made by the Exchequer. The grants made by the Exchequer may be subdivided into those which are made for specific purposes, which are usually paid as a percentage upon the money expended by local authorities—such as the education grant—and the block grants, which are made under the Local Government Act of 1929, as subsequently amended; the latter are paid at the beginning of every fixed grant period, and are generally out of date before the end of that period. In 1946 the rate income of local authorities amounted to £240,000,000. Last year the block grant amounted to £57,000,000.

Under Part I of the Bill the block grant will be abolished, and it will be replaced by the new Exchequer grant called the equalization grant. So far, there will be a loss to local authorities, but, as has already been pointed out, under the National Health Service Act of 1946, and also under the new Poor Law arrangements, the local authorities will be relieved of certain services. The net result of this addition and subtraction will be that local authorities will apparently be £58,000,000 better off. This represents about one-quarter of the income from the rates but, as the noble Earl, Lord Munster, has pointed out, it would be unwise for ratepayers to become too jubilant at this immediate reduction in their burdens. As everyone knows, the cost of education, of the fire service and of other local services is increasing, and is certain to increase very heavily in the course of the next few years; and it is almost certain that in five or ten years' time the apparent saving to the ratepayers of £58,000,000 will be entirely swallowed up by the increased cost of the services which I have mentioned; and therefore an Exchequer grant-in-aid will become necessary.

The fairness of the equalization grant will, of course, depend almost entirely upon the degree of uniformity throughout the country which the coming revaluation effects. As the Minister said quite fairly in another place, Part III of the Bill, which deals with valuation and rating procedure, is a corollary of Part I, which deals with Exchequer grants and other financial provisions, because, if the State is to provide money for local authorities that have less than the average rateable value per head of the country as a whole, it is necessary that valuations should be done in such a fashion as to bring about equality between the different local authorities. However, the new valuation lists will not come into force until 1952, and it is on this point that I must criticise the Government. It will be remembered that the Local Government Act of 1929 was preceded by a Valuation Act; that appears to me to be undoubtedly the logical and proper thing to do. In the present case it would be far better to deal with the subject of valuation first and then, later, to deal with the question of the new Exchequer grant. From the practical point of view that would not suit the Government, for a General Election would take place in the interval; and, as a result of that General Election, the Liberal Party would be returned to power and no doubt a very different Local Government Bill might then be introduced.

Let me be quite frank about this matter of uniformity of valuation. There is no such thing as absolute uniformity of valuation, and even if there were it is doubtful whether it would be entirely fair. As your Lordships know, in some counties the level of assessment is high, and the amount of rate in the £ is low; in other counties it is the other way round. That in itself discloses considerable irregularity in the application of the provisions of the Rating and Valuation Acts. I submit that a revaluation of properties throughout the whole country could, under the existing law itself, provide a large measure of uniformity, and that a Valuation Bill could then be introduced to smooth out so far as possible the anomalies and irregularities. Moreover (and this is a very important point), the necessity for a transitional period would not then arise. But the Government do not propose to take that course, and I must come down to earth and deal with the Bill as it exists to-day.

Part IV of the Bill, to which considerable reference has been made by the previous speaker, and which deals with the valuation of dwelling-houses, is of the utmost importance, especially when one remembers that over 90 per cent. of the dwelling-houses in this country come within the limits of the Rent Restrictions Acts. Under Part IV there are several different methods of valuation, according to whether the houses are pre-1919 houses, post-1918 houses within the limits of the Rent Acts or post-1918 local authority and housing association houses and flats. Your Lordships will appreciate the fact that the various dwelling-houses will have different burdens placed upon them merely according to the date of their construction. I can only reiterate what has been said by the noble Earl, Lord Munster, and I hope that the Government have not said the last word on this subject. I prefer the hypothetical builder to the hypothetical tenant. In view of the great shortage of property of all kinds in the country at the present day, the hypothetical tenant appears to me to be even more hypothetical than in days gone by, and therefore I prefer the hypothetical 1938 builder. But I submit that the proper way to deal with this problem is to value all properties on the same principle, and then adjust the differences between old and worn-out properties and newer properties of the same size by making larger allowances for repairs.

Part V of the Bill abolishes the rating of transport and electricity undertakings. In my view, however, it is impossible to apportion fairly the various parts of those undertakings to the areas of the local authorities which they serve. The reorganisation of the public utility undertakings, consequent upon their nationalisation, gives them a new status, and the Bill provides that they will make their contribution to rates out of a central pool. I am not sure whether the noble Earl, Lord Munster, made this point, but if he did not I will make it now. It is a little difficult to understand why gas undertakings are not brought within Part V of the Bill. There appears to be a lack of uniformity on the part of the Government. Part VI of the Bill provides for financial loss allowances to members of local authorities going about on approved duties, and, I think, is wholly commendable; it will be particularly helpful in rural areas. Before I resume my seat, may I refer shortly to two other clauses? With regard to Clause 131 of the Bill, I agree entirely with the noble Earl, Lord Munster, that this is hardly a time at which new methods should be devised which add to the burdens of the country, whether by means of taxation or by rates. Incidentally, one cannot help smiling at paragraph (a) of subsection (1), which says, in effect, that local authorities may provide out of the rates an entertainment of any nature. I think we should bear in mind that one man's meat is another man's poison and these words are wide enough to include a fox-hunt, a recital of the works of Plato or Aristotle, or even a lecture on the Local Government Act, 1948, by one of the Front Bench members.

Finally, may I refer to Clause 137, which says, in effect, that the Minister shall, by regulations, provide for the payment by the appropriate authority of compensation to persons who lose their employment as a result of the operation of this Bill? Then Clause 139 goes on to say that: Any power to make regulations conferred by this Act, shall be exercisable by statutory instrument, and any such statutory instrument shall be subject to annulment in pursuance of a resolution of either House of Parliament. I understand the position to be that regulations, whether they are included in a statutory instrument or otherwise, cannot be modified; they must either be passed or be rejected in toto. I know that we have had this point on many previous occasions, and I feel that, perhaps, the Government will deal with it in a sympathetic way. Subject to those few remarks, I can only say that this is a Bill which, if it achieves the purpose for which it is devised, is deserving of a Second Reading, and I hope that your Lordships will support the noble Lord, Lord Henderson, in that respect.

4.12 p.m.

LORD LATHAM

My Lords, when I have spoken formerly in your Lordships' House on matters concerning local government, I have done so as Leader of the London County Council. I have now, however, ceased to occupy that office, and it is appropriate that I should make it clear this afternoon that I am not speaking for the London County Council or for any local government authority or association. I do not regard the cessation of my office at County Hall as inhibiting me from speaking on this important legislative project. Indeed, I can perhaps approach it with a greater measure of freedom than hitherto I have enjoyed when speaking on matters of finance as between local government and the State.

Before proceeding to make some observations on the Bill itself, I would like, if I may, to deal with one or two points which have been raised by the noble Earl, Lord Munster. He, quite properly, referred to the necessity of adjusting such formulæ as are still operable as regards grants which contain a reference to the product of a rate. So far as I know there is only one in which that element still survives; that is in the calculation of the education rate. At the present time—I am charging my memory—I believe there is a deduction for the product of a rate of, I think, 8d. in the pound. It is proposed, as part of the recasting of the financial relationship between local government and the Exchequer, to revise very substantially the formula for the calculation of the grant for education. I gather that it is proposed that in that recalculation the product of a rate of 2s. 6d. in the pound shall be deductible in determining the measure of grant. I am open to correction, but I think that there is no other grant at the present time in which that factor is an element.

If I may, I will now proceed to another point which was raised by the noble Earl. I hope that I understood him correctly, but I did understand him to say that the Government should limit their proposals for the equalization of rates to the cost of specific services, and should exclude from that equalization services which were left to local initiation. As I understand it, that is a suggestion that we should go back, generally speaking, to percentage grants. I have frequently urged, in respect of new services, that the State assistance should initially be on the basis of a percentage grant, but no one who impartially views the administration of local government as a whole would wish to go back to the multifarious grants which existed before the block grant came into operation under the Act of 1929. Surely, the whole trend of Government assistance has been based on the general services which are provided by a local authority for the citizens. It is true that percentage grants still survive as regards education. It is intended that they shall continue as regards Fire Services. It is also proposed that there shall be a percentage grant for the local health services under the National Health Service Act of 1946. But, apart from those, no percentage grants are to continue.

I would remind your Lordships that the operation of percentage grants involves, inescapably, the almost detailed examination by the Central Government of the local authority's expenditure. The percentage grant is upon net expenditure approved by the Minister after examination, and local authorities, generally speaking, are already a little anxious—not, I think, without good reason—at the detailed interference (if I may use that word in no offensive sense) of the Central Government in the administration of local government, and especially in the formulation and initiation of capital projects. To suggest to local authorities that we should go back to the percentage grant requirement of examination and approval would, I think, disturb most of them.

The third matter with which I would like to deal—and I hope that here, especially, I have understood the noble Earl correctly—is Lord Munster's reference to the stabilisation of rates. Does that mean stabilisation through limitation of rate expenditure? Is that what the noble Earl had in mind? Or is it his suggestion that rates should be stabilised and that all expenditure otherwise incurred should be borne by the State? I rather think it was the first interpretation which the noble Earl had in mind. If so, I hope it will be rejected, not only by your Lordships but generally in the country, because the stabilisation of rates means, does it not, applying the axe to local government expenditure. Was the noble Earl invoking the 1948 counterpart of the Geddes Axe and the May Committee? It is no good suggesting that there should be a stabilisation of rates when the services which require the growing expenditure have been approved (and quite rightly) with commendable enthusiasm by your Lordships.

I remember well the long debates which took place on the Education Act; I remember how I, greatly daring, sought on one occasion to restrain noble Lords now sitting On the other side of the House who were seeking to improve the Education Bill in a way which, as I pointed out, would throw substantial additional expenditure on to local authorities. In the formulation of plans for nursery schools and other projects there was almost an unseemly lack of restraint—if I may put it in that way—on the part of some colleagues of the noble Earl to push the Government, the Coalition Government, into accepting more costly proposals. Is it suggested that in the interest of stabilising rates we should not go on with the Children Bill, which has met with common and general approval from all persons of good will throughout the country? We must appreciate that when we talk of stabilisation of rates, if it is intended to fix and apply a ceiling to rates, it means inescapably a cut in the social services.

THE EARL OF MUNSTER

Not necessarily.

LORD LATHAM

I do not know how otherwise you are going to stabilise the rates, with rising costs and expanding services. I support this Bill because it seems to me to be essential to recast the present financial arrangements, not only between local authorities and the Government but between the local authorities themselves. This step flows inevitably from the great changes which will ensue from the operation of the national health services, from the transfer of able-bodied poor to the assistance board and from the as we hope, complete, break-up of the old condemned Poor Law which will come about from the carrying into effect of the proposals of the National Assistance Bill. The operation of these enactments will produce a fundamental change in the finances of local government and in the grant relations between local government and the Exchequer. It is clear to any person with knowledge of the finance of local government that, apart from the effect of the National Health Insurance Act, it is impossible to expect to revert to the normal operation of the block grant system. The elements of the block grant formula have been so dispersed as a result of the war that they can never be collected together again to form a working formula. Populations have changed; migrations have taken place; derelict areas have sprung to life; other areas have been commercialised or industrialised; almost every one of the elements concerned—except perhaps the number of children, and even that has been affected—have been dispersed and cannot be reassembled. Therefore it is essential that the Government should bring in proposals which take account of that fact and of the fact that local government is to be relieved of considerable direct expenditure on health and other services.

It is the case that there has been no substantial change in the structure of local government for over seventy years. There have been changes, of course, in the distribution of functions between units, and in the financial relationship between local government units and the State, but there has been no fundamental change in the structure of local government. The project which perhaps came nearest to a fundamental change was the Local Government Act of 1929, an Act introduced by the late Mr. Neville Chamberlain when he was Minister of Health, and for which he is entitled to every credit for the courage and resolution with which (not always, I understand, with the support of his friends) he put that Act on the Statute Book. That Act transferred Poor Law from the old guardians to the county councils and county boroughs, and with it introduced the block grant. But the block grant failed to achieve its expected purpose. For instance, in 1937, when the block giant had been operating for no more than seven years, it became necessary in London to amend this formula. It was found that poor boroughs, especially those along the riverside, which were expected to be receiving boroughs, were in fact paying boroughs. With the co-operation of other Metropolitan boroughs, a scheme of supplementary equalization was introduced in the Act of 1937 which relieved Poplar, Bermondsey and several other boroughs of inequalities which it was thought the 1929 formula would remove.

The proposals in this Bill set out to remedy the defects which all of us must admit have been shown to exist in the block grant formula. In future the Exchequer grants are designed to secure that a substantial part of the savings of expenditure on hospital services will be diverted to the poorer authorities. Under present legislation—and the fact is important in regard to the submission, about which I will have something more to say later on, that the new Exchequer grants should be deferred until the uniform valuation has become operative—most of the saving of expenditure resulting from the transfer of the hospital services to the State will inure to the benefit of the wealthier authorities, because they, and they only, have been able to spend money on the development of the hospital services. That is bad enough. But, in addition to that, under the operation of the block grant, it is the case that the reduction in the block grant which will result from this transfer of expenditure would be made mainly at the expense of the poorer areas. Therefore the richer areas would make the savings, and the poorer areas would bear a large measure of the reduction in the block grant. It is proposed under this Bill that that shall be avoided, and that henceforth the Exchequer grant shall depend upon two factors: first, the shortage of rateable value by reference to an ascertained average; and, secondly, the extent of local expenditure as expressed in the rate poundage.

There are special provisions relating to London. It is proposed that there shall be a scheme prepared for the approval of the Minister in respect of the situation which will arise as between the London County Council and the Metropolitan boroughs. But I should say that London will lose completely a block grant of £4,800,000 which was formerly enjoyed. Nevertheless, under the scheme payments will be made to the Metropolitan boroughs which will bring great relief to many of the poorer boroughs. County councils are also required, generally, to make capitation grants to their county districts. As a part, also, of this reorganisation of Exchequer grants, there is to be a modification of the education grant in such a way (I would draw the noble Earl's attention to this point, having regard to what he said about the burden of developing education, which I do not dispute for one moment) that it is estimated that 110 local education authorities will share between them an additional £4,000,000. It is the case that that £4,000,000 will not come from the Exchequer; it will come mostly from thirty-six authorities who will lose under the new formula. Although I now carry no direct or personal responsibility, it is no great comfort to me to know that 85 per cent. of this £4,000,000 will be contributed by three local education authorities—namely, 70 per cent. from the London County Council, 7 per cent. from the Middlesex County Council and 8 per cent. from the Surrey County Council. Those three authorities will contribute 85 per cent. of the £4,000,000 which is to be distributed to 110 local education authorities.

It is undeniable—the figures are conclusive in support of this—that many local authorities with low resources will stand to gain substantially from this new Exchequer grant. It is the case that I myself, who spoke for the local authorities at the first consultation with the Minister on this matter, took the view that these proposals would bear too heavily upon certain authorities which are often, I think, incorrectly regarded as being wealthy. However, apparently after subsequent discussions, in which I did not take part and from which, of course, I cannot dissent, the authorities in the better-off areas have agreed to accept, by and large, these proposals, with the knowledge that in so doing they are helping the poorer districts. They are really seeking to achieve a measure of substantial equalization of rate paying. If anyone goes into some of the poorer areas in the Provinces, and contemplates their problems, and then learns of the poverty of their rateable value and what is the product of a penny rate, he will understand how the better-off authorities have come to accept these proposals.

It is the case that until we have a uniform scheme of valuation in operation there will be anomalies in the distribution of this equalization grant. It is idle to deny that. But the real test is this: Is it fair to these poorer authorities to delay the operation of the new grant for four or five years in order to avoid an uncertain number of anomalies? It is not only continuing a disparity and an inequity of treatment; it is asking them to bear something worse than that, because as regards the block grant they would, under existing legislation, be in a worse position as a result of the operation of the National Health Service Act, 1946. In a world of perfection we would all like to see the new valuation proposals synchronising with the new grant proposals, but as we do not live in a perfect world I am sure we shall all desire to do justice to the poorer areas as quickly as we can. It would, I submit, be unfair to ask them to carry this added burden for a further five years.

This brings me to the proposals for centralising valuation in the Inland Revenue Department. I think anyone who has been concerned with local government would find it difficult to discover reasons to justify the continuance of the present scheme of valuation and assessment. It is the case that under the Act of 1925 a large measure of uniformity was expected, but all of us concerned with valuation and assessment know that only a small degree of uniformity has resulted from the operation of that Act. I spent a short time, in my municipal activity, as a member of a county valuation committee. If I needed then to be convinced of the desirability of putting valuation out of the reach of local influence, I was convinced on that valuation committee. Valuation is a specialist's job. It is not a political job, and it is not an administrative job. It is a specialist's job, which should be done impartially and objectively, and by reference to certain accepted and acceptable standards. Local influence in valuation must be eliminated. I do not want to be unfair to the many thousands of people who serve in local government, but I believe it may be fairly stated that one seldom finds in local government a person, otherwise able, who is of any great utility or ability on a valuation or an assessment committee. Let us be perfectly frank about it. The qualities required are not those which attract people into local government. People go into local government for entirely different reasons, therefore the sooner the valuation of hereditaments for rating purposes is transferred to the Inland Revenue Department the better, in my view, it will be for local government.

There is this additional reason why that should be so. At present, the recipients of grants under the new proposals are the authorities who will conduct the valuations. They are, in fact, as recipients, those who will determine the cumulative rateable value of the district or area upon which will be based the grant they should receive. Clearly that is indefensible. We cannot leave that power there, and we must take steps to transfer it from them as soon as may be conveniently possible. It seems to me that the Bill embodies adequate safeguards. There are appeals to local valuation courts of local people, and I am pleased to see that there is no prescription that the local people will necessarily be elected persons.

They may be—and I hope they will be—persons drawn from panels which have been compiled with regard to ability and knowledge of the specialist elements involved. There is no doubt that there is a good deal of confusion up and down the country as to the valuation of dwellings, especially of small dwellings. There is no less confusion with regard to rents, when you have regard to the operation of the varying enactments controlling rent. But it seems to me that the proposals are an attempt to remove some of the difficulties and disparities and to import some rational element into the valuation of dwelling-houses. The proposals also seem to minimise the effect of the chronic shortage of dwellings in the country at the present time, a shortage which is likely to continue.

I am rather glad to see the somewhat imprecise figure of the hypothetical tenant will disappear, unmourned, unhonoured and unsung. In his place, apparently, we are to have a hypothetical 1938 cost of construction and a hypothetical 1938 site cost. I suppose that it may be said for those proposals that we have two against one, but they are to be based upon a Minister's specification or statement, and not upon complete hypothesis. It has been suggested that there will be some inequity between the basis for local authority houses and private houses, and that this, is the result of discrimination or of a desire to discriminate. As the noble Lord, Lord Henderson, said, the main points are these. First of all, as I see it, the whole emphasis of the Bill is to value on a pre-war rental or building cost level. It is, however, impossible in practice to maintain the site value for private houses at 1938 values and, therefore, the pre-war basis must be varied for this minor element in this particular class of house. It is an anomaly; but that is no reason why a departure from the pre-war basis should also be made for another group—namely, the local authority houses. That would not benefit private houses but would merely extend the anomaly to include local authority houses. Secondly, the local authority house site will not have simply the 1938 value. It will be valued by reference to the standard site or sites specified in the statement required by Clause 77.

The intention behind this—and I am sure the noble Earl, Lord Monster, will appreciate this from his experience on the London County Council—is to iron out the high costs which local authorities often have to incur in their rehousing programmes. They cannot confine their activities—and this is notably so as regards London and the provincial cities—to residential areas as most private developers can. Some authorities have to build in the industrial areas, and the London County Council and boroughs have to build right in the centre of London where the land costs are high. It would therefore seem to me—and I feel sure the noble Earl will appreciate this—that it would be unreasonable to expect the local authority tenant to have 5 per cent. of the inflated site costs in his gross valuation. This point is particularly brought out by the proviso to subsection (4) of Clause 77, which requires the excess of any site cost over £1,500 per acre to be ignored. With private houses, the high site cost would generally reflect the value of amenities in the area. I do not think that can be questioned. If that be so, those amenities, like other amenities, ought to be rateable and there is no inequity and no discrimination against privately owned houses in that submission. There are, however, these substantial differences which must be kept in mind. What does it amount to? Suppose that the site cost of a privately owned house has gone up by 50 per cent., say from £500 to £750 an acre; then assume—as I think is reasonable—that there are ten houses to the acre. This would mean a difference of £25 in site value or 25s. in gross value, and about £1 in rateable value. I suggest, therefore, that the proposals of the Bill are not unfair and do not discriminate against the privately-owned dwellings. We must bear in mind that most local authority dwellings of post-1918 are heavily subsidised, largely because of the high cost of land. They are small dwellings, and they are intended to provide for a shortage which would otherwise exist of accommodation for people of limited means.

It has been suggested in another place, I think, that there will be many instances in which adjoining dwellings will be differently valued. I frankly cannot see how in normal circumstances that would happen, except as regards the wholly-detached house. The semi-detached house and the terraced house were surely all built, roughly speaking, at the same time, and there is therefore the same building cost and the same site cost; and if those are the governing factors—and they are intended to be—I cannot see how there can be disparities between them. It may be that there will be disparities at times as regards what appear to be, from the outside, quite similar detached houses. Those dwellings are usually of a larger type, and most detached houses of a large type embody either within themselves or outside special and different features with amenities which distinguish the one from the other, and therefore an appropriate difference in their rateable value seems to me to be justified.

I should like to say a word about the power of local authorities to provide entertainment. Although the proposal does not apply to county councils, I welcome it. I think it is a wise and admirable extension of the powers of local government and I believe it will meet with unqualified acceptance among the people, and especially among the younger sections of the people of this country. As one who was connected with the London County Council, I am not unaware of what can be done by a local authority in the field of the development of culture and of art, music, opera and entertainment of that kind. Under the stimulus of "Holidays at Home" the London County Council introduced into its parks opera, musical comedy, ballet and revue, with abundant success—bearing always, as those must who provide entertainment in the open air, the risk of weather, which is not an inconsiderable risk at times in this country. Nevertheless, for a relatively modest sum, having regard to the size of the population of London, the London County Council did make a substantial and, I believe, an abiding and enduring contribution to the development of the arts in the County of London.

I believe that local authorities generally should have this right. I do not think that the private entertainment business will suffer. From my business connections, I well remember how, on the advent of wireless, it was predicted that the gramophone business would die and that gramophone records would just disappear. It is a fact, however, that there are more gramophone records being made, especially those dealing with—if I may say so without offence to anyone—the higher types of music, than were ever made or, in my submission, would have been made but for the fostering of music by B.B.C. programmes and the impetus and stimulus that has been given in that way. Similarly the taste for books and the desire to read on the part of the population of this country has been encouraged by the publication of cheap books such as the Penguin Series—though we are, of course, all suffering from the shortage of paper at present. No one desires to see the entertainment industry injured. But these activities, wisely operated by local government authorities, so far from injuring the private entertainment business of a proper character (and I am no Stiggins in these matters) will help it. The field will be widened and so will the area of demand. I hope, therefore, that this proposal will be warmly supported by your Lordships.

I am old enough to recollect the objection to the provision by the smaller local authorities of public libraries; and I believe (I do not know what the existing law is) that the original law provided that the expenditure for the provision of public libraries should not be in excess of a 2d. rate. That proposal met with similar objections to those which are now being urged against this power to provide entertainment. Yet is there anybody who would question the wisdom of, and the benefit that has flowed from, the power of local authorities to provide public libraries? I do not believe it has injured in any sense at all the private subscription libraries; on the other hand I believe it may well have helped them.

Finally, I should like to make a few observations on the payment to members of local authorities of allowances in respect of loss of earnings and other expenses to which they may be put. None of us, I think, would desire to see membership of local government authorities become a paid profession; we must preserve local government from that. It is a valuable and honourable held of public service. On the other hand, it would be idle to deny that there are many people in local government service at the present time who are suffering, and have suffered for a long time, real hardship as a result of the losses occasioned to them in carrying out their duties. The loss of wages is important in these days, and so of course is the fact that in many cases, and notably in the case of women, these people have to employ somebody to do their work or look after the house whilst they are carrying out their duties as members of a local authority. The payments they make in this connection are payments out of taxed income, which means that the burden is substantially higher than it appears as expressed in shillings or in pence. In my twenty years in local government I have known a number of people to whom service on a local authority has been a real financial hardship. But what is more serious in the present situation is that it denies local government the benefit of the services of many people who just cannot afford to come on to a local authority. Therefore, it narrows the field of selection, to the permanent injury of local government itself and to the permanent disadvantage of the person who, because of financial circumstances, is unable to accept nomination for membership.

Anything that can be done to widen the field of selection of members for local councils ought to be done. Those who are concerned with selecting and arranging for candidates know how difficult it is on occasion to find suitable persons with adequate time and resources. This proposal to make modest recoupment to members of local authorities for loss of earnings or for expenses incurred in the performance of their duties ought substantially to help; it should be to the benefit, as I have said, of local authorities and of the persons themselves. In my view, this Bill is another step on the road towards securing equitable financial relationships between local government and the State. It is the ease that, unless something is done and done fairly quickly, so parlous is the financial position-of some local authorities that serious consequences may arise. Notwithstanding changes, that are taking place in local government, all of us want to see free, democratic local government maintained. It can be maintained only on a basis of equity, financial soundness and financial prudence. I submit that this Bill is based upon fairness and equity, not only as between the State and local government as a whole, but as between local government units themselves. I hope that your Lordships will give the Bill a Second Reading.

5.2 p.m.

VISCOUNT GAGE

My Lords, as this Bill covers a number as aspects of local government, I think it would not be out of order to make one comment upon local government generally. It seems to me that members of local authorities are to-day rather in the position of the heroes of the old-fashioned fairy stories, who were always being urged on to great deeds by the good fairy and who were always being thwarted by the machinations of the witch. In rather the same way, we have been, and I think we still are being, urged by the various Government Departments to formulate ambitious development schemes for new houses, new schools, new drainage, new water grids, new by-pass roads, and so forth, and then, when we come to carry them out, we are told that there is no steel, no timber, no pipes and so on, to put into operation more than a small fraction of the programme. As to roads, I think we shall be lucky if we can keep enough men to maintain the roads which we already have, let alone construct new ones.

If we ask how long the embargo is to continue, we are told that we must wait till June, when the whole position will be reviewed. I do not know whether the position will be any better in June. Some people take rather a grim view of what is going to happen in June. I do not profess to know. However, I feel that if these restrictions are to continue for a long time, many of us will find it increasingly difficult to make any sense of these long-term ambitious programmes. The noble Lord, Lord Latham, referred to the cutting down of services. Although I myself am against any such reduction, it did ocur to me that there was a third way—that is, not to introduce any new legislation imposing fresh tasks upon local authorities, particularly if they have not the men and materials with which to carry them out. Your Lordships may perhaps remember the line of the poem, 'I am heartily sick of shadows,' said The Lady of Shalott. I think that a number of people in local government are beginning to be rather sympathetic towards that sentiment.

I venture to raise this matter because I think we must be excused if we do not automatically assume that something is going to happen just because a Bill says it is going to happen. We have been told that one of the main features of this Bill is the setting up of new machinery to conduct the valuation. We have been told that it is to be conducted on new principles, on which a number of new hypothetical assumptions are to be made. I do not propose to go into any of them except one. I am concerned to know whether the valuers themselves are going to be "hypothetical assumptions" or not. Your Lordships will remember—I think the noble Earl, Lord Munster, has already mentioned it—that last summer we passed the Town and Country Planning Act, which set a considerable burden on district valuation staffs—that is to say, the valuation of all building land and all minerals, other than coal, within five years. I do not claim to be an expert on these matters, but I have been told by people I believe to be possessed of the highest authority that there is little real prospect of that duty being properly carried out in the five-year period.

Now, on top of that, we have a proposition to revalue all properties within the same period, although I am quite aware that a different set of valuers are concerned and they are to be largely recruited from existing local authorities' staffs. What I ask is this: Do the Government know that they will get sufficient valuers in this way? Do they know that sufficient officers are prepared to be transferred from local government, where they are already performing part-time duties of a different nature? In particular, can the Government obtain a sufficiency of valuers without interfering with the district valuers' market for the town planning valuation? I notice that the Chartered Surveyors' Institution said that they were convinced that shortages would greatly embarrass the successful working of this part of the scheme. If this part of the scheme does not work, the Bill as a whole will not work.

I must confess that I am not speaking entirely academically on this matter. The county from which I come (East Sussex) is one of those counties which, because of their high rateable value, get no equalization grant under this scheme. Therefore, the cost of any new services—over which, incidentally, we have extremely little control—has to be found largely by our ratepayers. This year we have to pay upwards of £250,000 more in rates than we did last year, and that is despite the transfer of the health services, to which reference has been made. We are also one of the authorities that lose part of the education grant. Compared with our position, the former depressed areas seem to me for the time being to be on a pretty good wicket. Their assessments are indeed low, for reasons which are quite intelligible but which, I suggest, have now largely been removed by this equalization grant, and, of course, by this grant their real burden is greatly reduced. The outcome of all this is that we in Sussex think that comparable classes of people—let us say, the tenants of council houses—will be paying very different amounts in rates according to where they live. We think, perhaps wrongly, that the tenant of a council house in East Sussex may well be paying anything from five to seven shillings a week more in rates than his opposite number in Wales. That is quite a proportion of the weekly budget, particularly taking into account the pegging of wages and prices. I hope, if these figures are wrong, that they will be contradicted.

I am sure that few people would grudge the former depressed areas their temporary good fortune, but if for any reason this valuation were not complete in 1952 or 1953, or if it were badly done, or if it drifted on in some unsatisfactory way, a somewhat serious position might arise, particularly when the rates go up, as we think they are bound to do when this construction is allowed to take place. We would not have rate equalization at all then, and I am afraid that the vicious spiral that high rates carried with them in the former depressed areas would start operating in new areas. I do not want that to happen in my own county, and that is why I am taking what the noble Lord may consider to be rather a morbid interest in this question of valuation. I do not know whether he can give us any real reassurance on this matter. I shall be rather surprised if he can. But I hope that the Government will not introduce any further legislation making still more demands on our slender resources of valuers. I noticed in the recent correspondence on the subject of capital levy that this practical consideration—perhaps a minor consideration—has evaded the attention of the contributors. I hope that it does not evade the attention of His Majesty's Government.

That is nearly all I want to say about the contents of the Bill, except that I want to draw attention to one rather odd feature. This Bill is being read in your Lordships' House to-day, March 2, and large parts of it are to come into operation on April 1 next. I submit that a good deal of this Bill is virtually in operation already; that is to say, that every precepting authority has made its precept, and every local authority has prepared its budget on the assumption that this Bill will go through virtually unamended in certain important particulars. It may be constitutionally possible for your Lordships to amend say, the "weighting" formula, in the direction of altering the sparsity factor, but if that were done the dislocation that would be caused all over the country would be enormous. This Bill will affect to some extent the weekly budget of every household in the country, however great or small, and a great deal of apprehension has been expressed as to the way in which it will work. And not all that apprehension comes from the Opposition.

I have said that I am not an expert in these matters, but I have a feeling that this is just the sort of Bill that ought to be subjected to a rigorous examination by a reforming or revising Chamber of some sort. In the recent debates in your Lordships' House a number of views were expressed by the Government, and by their supporters, as to what should or should not be the rôle of this House—particularly what it should not be. I am wondering what the Government themselves think our rôle should be in connection with this Bill. It is a matter which might command attention in any discussion in regard to the reform of your Lordships' House.

5.15 p.m.

THE EARL OF SELKIRK

My Lords, I am sure that all your Lordships have listened with great interest to the well-informed and extremely interesting speech which has been made by the noble Viscount, Lord Gage. He has spoken in regard to payments from well-to-do areas being made for the assistance of depressed areas. In a sense I suppose I am more interested in depressed areas than in well-to-do areas, but I think that some of the agricultural labourers in Sussex would be horrified if they knew the location of the local authorities which are to benefit under the equalization grant; and, of course, I am not referring to depressed areas. In that respect I particularly commend what the noble Viscount said at the end of his speech, that this Bill should be subjected to very careful examination, because there are a number of anomalies which I doubt whether it will be possible now to put right. It is a great pity that this Bill should have been relatively hurried, as it has been. I know that there are reasons but on the other hand it seems to me that it would not have been impossible to introduce a transitional measure to meet the intermediate period; and that would have allowed fuller consideration of a further Bill such as this, which is spoken of as, and may well be, a pillar in the history of local government administration. I would ask the noble Lord, Lord Henderson: Can he tell us when the revised figures showing the financial relations between the Government and local authorities are to be issued? I understand that the figures which we have at present are not considered reliable and that other figures will be issued.

This Bill is something of a mixture and, if I may start at the end, I would like to say one word about Part VI. The noble Lord, Lord Latham (I am sorry to see that he has gone), spoke of widening the field of choice in local government. I am sure that no one will disagree with that principle. But service in local government has not only the deterrent of lost earnings; it has the deterrent of time, which is nearly—if not quite—as important. In this case we are allowing for payment for subsistence and loss of earnings, of some £390 a year. I am not clear whether that is free of tax or not, but if it is free of tax it will amount to something approaching £10 a week. That will be a fairly attractive salary to some people for a five-day week, and there is a danger that discussion and meetings may be so prolonged as seriously to impede others, and thereby narrow the field. As the noble Lord probably knows, we have had some experience of this in Scotland, and it is a real danger. I am glad that there is to be publication in this matter, because that will be a valuable safeguard, which will, in some measure, check the time spent on this work.

I would like to say one word in regard to hydro-electric rating. The noble Lord has not explained exactly how the rates are to be apportioned. Am I to understand that in areas where there is no electricity (that is to say, where there are no units sold) there will be no rates paid to the local authority? That seems to be a double hardship. It is certainly felt in many areas that the promise of rates was used specifically as a bribe to get them to agree to the disturbance which the provision of hydro-electric plant causes. In some measure they feel, shall I say, aggrieved—or at least disappointed—that they have not gained the full measure of their rates.

If I may, I would like now to pass to Part II of the Bill. I am in a somewhat awkward position because not one word of encouragement or recommendation has yet come from the Government on that Part. The only thing that has been said is that Part I, on which Part II is based, is full of every conceivable kind of anomaly. So I am faced with the prospect of basing Part II on Part I which itself rests on an anomalous if not chaotic basis. What I am at a loss to understand, since we in Scotland apparently have a satisfactory system of valuation—at least, we have been so informed by His Majesty's Government—and we consider that in England you have a satisfactory system of raising rates, is why it is not possible to exchange the two.

Now I would say one or two things about the way in which rates are raised. The difficulty which must inevitably arise in any system of taxation on rates is that it is substantially based on two points. The first is that the valuations should be roughly the same. That is established in Scotland by making the rent the rateable annual value. In other words, it is established—this may seem an unpopular way of doing it—by the law of supply and demand. I am not saying that it is a perfect method, but basically it is fairly stable. The second point is that in raising taxation on property it presupposes some relation between the substance of the occupier and the type of house which he is using. That, of course, is not true to-day. For that reason I think that rating is fundamentally and inherently a bad way of raising taxes. In spite of what Lord Latham has said, I hope it will be possible to obtain some form of stabilization soon. If it is said that social services can continue only by increasing rates, then I say in reply that social services will stop. Rates cannot go on rising, because houses which are an essential part of the social system will not be provided.

The foundation of Part II, as I have said, rests on Part I, and the question naturally arises, What should be the correct relationship? Unfortunately, His Majesty's Government have not been able to help us in this matter. The Secretary of State, speaking in another place, said that it was not possible for him to produce figures which would justify either 25 per cent. or 50 per cent. I suggest that that is making allowance for a fairly wide margin of error. It means that he does not know whether he is more than 100 per cent. wrong. I should have thought it would have been possible to get a little closer. I should add, perhaps, that there is one reason which has been adduced—though do not know what importance is attached to it. In the words of the Lord Advocate, the formula of 25 per cent. was one which had been almost hallowed by precedent. I do not know what weight that carries with it. But I do say, without fear of contradiction, that if the percentage of 25 was correct in 1919 it is mathematically certain that it is incorrect to-day, for the simple reason that one element in it is owners' rates, which have increased by at least 100 per cent. since that time.

I am sure that I am only saying something with which everyone agrees when I declare that no one wishes Scotland to get more than her share. I am sure that everyone will also agree that England and Wales should get their right and proper shares. But there are one or two things which strike one as curious. After all, it is the application of this Bill which matters. There is no theory in it. There is simply a mathematical formula. I, for one, would absolve the Government of any suggestion of making a doctrinaire approach to this particular point. I see no doctrine in it at all. In fact I might almost wish there were some. First, if I may, I will make a comparison between what happens in Wales and what happens in Scotland. We have looked upon Wales and ourselves rather as brothers in adversity over the last thirty years. We have had similar problems with which to deal, and we have worked to some extent on similar lines and vied with each other in industrial development.

Now we find that Wales, with half the population of Scotland, is getting more than twice the equalization grant. I will not say more by way of comment than that the circumstances are suspicious. Examining the facts with regard to my own county of Lanarkshire and the county of Durham, I find that Durham has a population which exceeds that of Lanarkshire by 60 per cent. and a grant of over 130 per cent. Superficially that indicates that there is something in the equalization grant which has not worked out as it should. Here we have two areas which are substantially the same, based on coal and the heavy industries. Both have suffered greatly in the last thirty years. I should have thought that they would be met in substantially the same way.

If I may, I would now take another example. It is one which has been used before, but it applies to the main issue, and that is, what is being paid per head. I am surprised that more figures have not been brought out, for basically it is the important point. It is not easy to compare any two local authorities, but I will take two—Birmingham and Glasgow. I expect the noble Lord who is to reply has some notes about them, because I gave him an indication that I was going to raise this matter. These two cities have almost exactly the same population (about 1,100,000). Now Birmingham has had a good thirty years. It has had the advantage of staple industry which has been growing up and developing. Its story in that respect is very different from that of Glasgow. I do not think anyone would contend that the standard of housing in Glasgow was better than that in Birmingham, yet we find that whereas the total valuation of Glasgow is £11,500,000, that of Birmingham is £7,500,000. Further we find as regards the rates, after the equalisation has taken place, that Glasgow is paying £6 12s. 9d. a head and Birmingham is paying £4 19s. 2d.

The point of all this is that Birmingham gets an equalization grant of £600,000 and Glasgow gets nothing. I emphasize this point to show that basically there is a difference of some considerable importance which is not entirely allowed for in the structure of the Bill as it stands at the present time. Now this is not just theory. There is a clear and definite reason. The law in the two countries in regard to rateable value is materially different. As I have said, valuation in Scotland depends on rent, and rent contains one element which, in England, is deducted to find the net annual value. That element is maintenance; and it includes owners' rates. If I may give an extreme case, I will deal with that of a single house. This is a clear-cut example of what can happen. I do not suggest that it is an average case, but it is a normal case. If we assume that the house has an economic annual value of £50 a year—by that I mean maintenance and capital charges together come to £50—I understand that in England there would be a statutory deduction of 20 per cent. That would bring the value down to £40 rateable annual value. Now suppose we take the rates at 16s., it will give us an annual rate of £32. In Scotland there will be added to the economic annual value the owner's rates, which we can take as half 16s.; that is 8s. It is not sufficient to add the 8s. rate on £50—that is £20—making £70, because £70 then becomes the rateable annual value and rates have to be paid on that figure. Rates have to be paid on rates. I think I am correct in saying that if it were worked out, it would be found that such a house would have a rating of £84 a year, the owner paying £33 10s. and the occupier £33 10s.

I draw attention to three points arising from this. The rateable value in England on a similar house is £40, and in Scotland is £84, a difference of 110 per cent.; secondly, the rates payable in England are £32 a year and in Scotland £67, a difference also of 110 per cent.; and thirdly, in a house of the economic value of £50 in Scotland the total rates would be £67, or 140 per cent. tax on a prime necessity of life. This is a crying scandal which should have been put right in this Bill. It is something which has been demanding action for a long time.

I know quite well that to do so is difficult. When anyone touches rent, he touches something very delicate, and there might be a violent reaction. I fully appreciate the reluctance to do anything, but I wish to impress the noble Lord that this matter is one which demands action. In another place one of the Government's own supporters spoke of the rates in Scotland as being "preposterous." There is a general fear that the worst will happen if anyone touches the rates. It might give the impression that the grasping landlord is having his burden removed from him and thrown on the poor ratepayer, whose face is being ground in the mud by some reactionary Government. But the results are thoroughly bad. In the first place it causes bad condition of houses which are allowed to deteriorate because there are no assets; and secondly, it leads to there being no houses at all. In practice landlords allow houses to deteriorate to such a point that they have to abscond rather than meet the prospect of paying rates on houses for which they get no rent, and the tenant is left paying no rent, and simply paying rates to keep on the register for a new house. It is a great pity that the opportunity is not taken in the Bill to give effect to the recommendation in the Sorn Report.

The Secretary of State for Scotland is, I think, unhappy about the relations between Parts I and II. He said in another place: If any local authorities or the Scottish local authorities as a whole produce reliable figures between now and Report stage to prove that this is unjust to Scotland, I am quite prepared to see it is remedied. Local authorities have taken this matter in hand and I am told that they have examined 90 per cent. of their rateable property on the same statutory basis as exists in England. I see in the Sorn Report that statutory reductions in England are not the only reductions made. I speak with no expert knowledge but I believe the reductions are sometimes greater. The Report says: The gross values in 1938 of privately owned let houses were one-third below the rents which were being obtained. The gross valuation was one-third below the rents, and I suppose that the statutory reductions were made from the gross valuation. This was not taken into account by the local authorities in Scotland. Their valuation showed, however, that the rateable annual value in England and that in Scotland differed, not by 25 or 50 per cent., but by 65 per cent. These figures, I believe, are not questioned. I submit to the noble Lord that this is a case which demands some form of examination.

There are a number of curious anomalies. What are well-to-do authorities? Then there is this curious case. Suppose an anarchist were to blow up Edinburgh's waterworks in the county of Peebles, the Peebles-shire rate would go down, because they would immediately come in for an equalization grant. That is rather absurd, when you come to think it out. Just before the Third Reading ended in another place the Secretary of State for Scotland gave this pledge: I give Glasgow a pledge, and I give the honourable and gallant member a pledge, that we will have these figures examined and try to make some investigation into this matter to see if we can come to a conclusion as to the relative measures of 25 per cent. or some other percentage. I think we should give the Secretary of State some opportunity of fulfilling that pledge. As the Bill stands at present I can see no opportunity for him to do so. In Clause 30 he can make some report in 1952, but so far as I am aware he has no possibility of giving effect to a report before that date. I hope the noble Lord will suggest where in this Bill the Secretary of State can redeem that pledge.

5.36 p.m.

LORD MORRISON

My Lords, the noble Earl began by saying that he was in a difficulty, and I can quite see that he was, because I am in almost a similar difficulty. It seems that our procedure has been the wrong way round in this debate. I should have explained the provisions of the Bill as they applied to Scotland, and the noble Earl should have followed me, instead of which, here I am, expected to reply to the noble Earl, and, at the same time, as announced by my noble friend, Lord Henderson, to make the explanation that the House always requires—namely, why it is that there are differences in regard to Scotland, and what our proposals are. I must carry out the promise my noble friend Lord Henderson gave, and make an explanation of the Bill as it applies to Scotland, and perhaps that may be of help to the noble Earl.

As he said, Scottish interest in this Bill is mainly centred on Part II, which is identical in principle with Part I, which is the English counterpart. Differences in the local Government structure and finance in the two countries made it desirable in the interests of clarity to have separate Parts. The provisions of Parts V to VIII are such that it has not been necessary to have separate Parts for each country. The general scheme of Part II is to discontinue the present grants under the Local Government (Scotland) Acts, 1929–1946, and to give, by a system of equalization grants as from May 16, 1948, the greatest measure of relief to areas whose rating resources are smaller and who accordingly require substantial assistance if they are to maintain essential services on the same standard as in other parts of the country. The present block grant will be discontinued on July 5, 1948, when hospitals are taken over by the State. This broad equalization of rating resources is achieved by providing that, where the average rateable value per head of weighted population in any county or large burgh is below a national average, additional rateable value will be credited on which the Government will, in effect, pay rates. That will accordingly place the authority in the same position as if the rateable value were brought up to that average. It is estimated that if the scheme had been in operation in Scotland in 1946–47, 29 of the 31 counties and 22 of the 24 large burghs would have qualified for grant.

I do not know whether the noble Earl desires me to go into a lengthy disquisition on the many other differences. No doubt he is well acquainted with them, and he and other noble Lords have probably read some of the debates in another place. I do not propose to do so. I would, however, like to answer one or two of the questions he has put to me. He asked about the Hydro-electric Board. The Hydro-electric Board will not pay less under the Bill than they would have done otherwise; but contributions will be distributed evenly over the whole Highland area. Each local authority under this Bill will, in addition, have its rateable resources brought up to the average. That average would not be influenced by the Scottish Hydro-electric valuation, even if it were continued; its continuation would merely have raised the local level of valuation, and so diminished the equalization grant.

The noble Earl asked me a question with regard to the figures. The reply is that the figures in, the white Paper are being revised, as promised by the Secretary of State, in the light of more recent estimates; and new figures should be available within a few weeks. The main part of the noble Earl's speech this afternoon consisted of the contention that this Bill should be used as an opportunity of bringing the Scottish rating system into line with the English system, by providing, as I understood him to say, that the rates should be met wholly by occupiers—

THE EARL OF SELKIRK

They are now.

LORD MORRISON

—instead of partly by owners, as at present.

THE EARL OF SELKIRK

; I am sure the noble Lord appreciates that by "occupiers now," I meant either in the form of rent, or directly in payment.

LORD MORRISON

The noble Earl referred to many anomalies which he considers arise under this Bill. I am not contending that this Bill is perfect; I do not think that any Bill is ever perfect. If it were possible for us to be here in 100 years' time, we should still be hearing of anomalies; there are always anomalies. But with regard to many of the anomalies the noble Earl has mentioned, all I can say is that if practical suggestions for removing those anomalies are put forward on the Committee stage, we will give them our best consideration, because, obviously, it is the intention of the Government to try and make the Bill as watertight as possible.

The question which the noble Earl posed in regard to what I call the system of owners' rates in Scotland raises a subject of some magnitude and considerable difficulty, as I am sure he appreciates. He indicated one Committee, but this matter has been considered in recent years by several Committees, who have expressed differing views on its abolition. The Royal Commission on Local Taxation (1902), the Dunedin Committee on Local Taxation in Scotland (1922), and a Committee set up by the Association of Local Lands Valuation Assessors of Scotland (1933) all recommended that the system of owners' rates should remain unchanged. On the other hand, a Committee set up in 1933 by the Scottish National Development Council, under the Chairmanship of Sir Henry Keith, recommended that owners' rates should be abolished. The Sorn Committee on Rating and Valuation, which reported in 1943, and to which the noble Earl referred, were precluded by their limited terms of reference from examining this question fully. They-referred to it, however, in the following terms: We are precluded by our terms of reference from considering all the implications of such a change, and we realize that a thorough examination of its desirability would take us far beyond the field of private enterprise house building. Nevertheless, we feel compelled to record our view that, if it were otherwise acceptable and could be effected, this measure would provide the solution to the rating difficulties which we have been considering. The Sorn Committee's main recommendations were: first, that the poundage of owners' rates should be stabilized at its present level; and, second, that property which was empty for more than three months should be exempted from rates. It has been stated several times in another place, in answer to Parliamentary questions, that legislation on the Sorn Committee's Report is not contemplated at the present time. The Ridley Committees of 1937 and 1943 on the Rent Restrictions Acts mentioned the special difficulties arising from owners' rates where rents are controlled, but did not make any recommendation on the subject. So much for the magnitude and difficulty of the subject, and for the differing views expressed by Committees in recent years.

The proposed change would, of course, alter the whole basis of contracts between landlord and tenant, and its effect on existing contracts would have to be considered. A thorough inquiry into the subject would be necessary. Such an inquiry might take a very long time, and it might well prove impossible to reach unanimity. The abolition of owners' rates would not reduce the rate burden on a local authority, but would merely transfer the burden from one set of ratepayers to another. The present Bill will assist ratepayers generally, and in areas where rating resources are low a substantial proportion of the rate burden will be transferred from the local authority to the State. The Secretary of State summed up the attitude of the Government to this matter in the Third Reading debate, in another place, when he said: Similarly, the rating system has been condemned"— The noble Earl used almost those exact words. Everybody has condemned the rating system, especially in Scotland, for the last thirty years; but nobody has done anything about it for the simple reason that nobody knows what to do about it. If the honourable and gallant Member…or anybody else can suggest any way which will be acceptable to the people of this country, the Government will give consideration to it. Clearly, it is not so easy to remove these anomalies, though we admit they exist. Such matters will require much more investigation and much more study, and a great deal of common consent on the part of the people, before they can be removed. I do not want to take up more of your Lordships' time; Scotland has its fair share of most debates. I only want to say again in regard to the various points which the noble Earl, Lord Selkirk, raised, and particularly in regard to the point with which I have just been dealing, that if the noble Earl has any proposals to make and will bring them up on the Committee stage, I can faithfully promise that they will receive most earnest consideration. After all, the function of your Lordships' House in regard to Scottish legislation—while I have been here it has been done very successfully—is to improve Bills, and if we can improve the Scottish part of this Bill by any suggestion which the noble Earl may see fit to raise on the Committee stage, I am sure we shall all be pleased, and we shall have a better Bill.

5.49 p.m.

LORD HYLTON

My Lords, at this late hour I am sure your Lordships will not wish me to get involved in this across-the-Border skirmish, other than to express my unbounded admiration for the powers of research which have just been revealed by the noble Lord, Lord Morrison. I think many members of your Lordships' House will have been interested, if not electrified, by some remarks made by the noble Lord, Lord Latham, a few moments ago—in particular, his statement regarding the small effect which the site cost has on total building costs. That is very different from what members of his Party have been saying for many years. In fact, he rather led us to believe that site costs were of little effect when making out the total building costs of local government schemes—a surprising admission from the noble Lord.

May I now return to Part I of the Bill? I think the principle of the equalization grant has been admitted to be, on the whole, taking the present circumstances of the country into consideration, fair in principle. I believe most speakers agreed that it was fair in principle, but unfair in its present application. That is because for the first four years it will be based on a completely out-of-date valuation—a valuation of 1932. To our minds, that is a serious blot on this Bill as it stands before your Lordships' House to-day. For four years the present valuation lists will continue in effect—namely, from the present year until the year 1952—and it is the opinion of many members of your Lordships' House that that is quite unnecessary. It would have been simple, administratively, for the Minister to have used the existing machinery of valuation (and I have taken professional valuation opinion on this point) to effect a re-valuation in between eighteen months and two years—two years instead of four years.

Noble Lords who have spoken the afternoon from the Government side of the House have said that the present machinery would not have given a fair valuation, and that the anomalies to which reference has been made would have been continued. But that is not so, because it would have been perfectly simple for the Minister, by issuing a regulation containing a formula on which the revaluation was to take place, to have ironed out all the anomalies to which so much exception has been taken by members on the Government side of the House. It is, to my mind, a great pity that the Minister has been adamant in refusing to use the existing machinery for the revaluation which should have taken place in 1939, which was put off owing to the outbreak of the war, and which has already been started in many counties since the war. It is principally those counties who have started the revaluation since the war who will be penalized, because they have already raised their valuations. They will be penalized owing to that very fact. They will lose on the equalization grant because they have already raised their valuations since the war—an unfair and inequitable state of affairs.

A premium will be given to those areas in which low valuation exists to-day. That premium will continue for the four years preceding the year in which the new valuation under the Minister's scheme will come into effect—namely, the year 1952. It is quite clear from the published list which counties will benefit most by the Minister's present arrangements or proposals. Noble Lords have already referred to the sparsity figure which is see at 70, and I think that figure might well be examined at a later stage. Although the total sum of the equalization gram could not be raised, a fairer division of it could be made; that is to say, by altering the figure of sparsity from 70 to a figure somewhat above that.

I would like to refer briefly to difficulties which are going to occur in the position and recruitment of valuation officers for the Minister's new scheme. Many of the existing valuation officers are part-time officers. Some of them are borough treasurers or clerks of local authorities, and they act as valuation officers in their spare time. I have taken the opinion in one county—the county from which I come, Somerset—and I find that of twenty-three valuation officers only three are prepared to accept transfer into the Inland Revenue service. If my figures are correct, it shows a serious loss of valuation officers, and I would ask the noble Lord to tell us, when he replies to this debate, from whence he proposes to draw the balance. Where are they coming from? Many of these officers, professional men qualified in valuation, have already been mopped-up into Government service under the provisions of the Town and Country Planning Act of last year. The Minister has referred to valuation as an art. I ask the noble Lord: Where are the artists coming from?

A further small administrative problem, which all those who take part in local government see daily, is the difficulty encountered in accommodating the new officials required for the various new services imposed on local government. It is well known that county towns, in which are situated county halls and the whole paraphernalia, are terribly overcrowded, and although local authorities advertise in the Press to engage new staff, qualified applicants for those posts often refuse to take them up owing to the fact that no housing accommodation is available. That applies not only to valuation officers but to the whole run of local government officials. Without those officials local government will break down. Is it the intention of the Minister to create some new type of tied house to accommodate the great number of new officials he wishes to appoint?

It is bad enough that for the first four years the equalization grant will be on this false and unfair basis; it will be intolerable if this state of affairs is continued after the four year period owing to the shortage of staff, and to the faulty administrative arrangements embodied in this Bill. Local authorities, through their associations, made other proposals to the Minister for tiding over this interim period between the disappearance of the existing rating authorities and the completion of the new valuation lists. These proposals were turned down without a moment's thought by the Minister; in fact, the Bill was printed and circulated in another place two days after the Minister received a deputation on this subject; showing quite clearly that the Minister had no intention whatever of paying the slightest regard to any representations made to him. If these are the facts, it is surely for the Government to show beyond any doubt that the proposals in this Bill will work, and will work fairly.

6.2 p.m.

LORD KERSHAW

My Lords, I rise to support the Second Reading of this Bill and I do so on two main principles. The first is that it is a necessary corollary to several Acts of Parliament passed during recent years dealing with our social services; and, secondly, taking the long view—and I say that advisedly—because it is another illustration of the great advance that this country has made in recent years to iron out the peaks and valleys of our social and domestic economic affairs. I sometimes feel that we are much too modest about our achievements in this regard, achievements which have been contributed to by all sections of the community and by all Parties in the State. I feel that more might be done to impress those countries which seem to think we are "down and out," decrepit and so forth, with the fact that we have made such great advances in that direction.

We have the enormous extension of our educational services, the extension of the principles of social insurance to cover practically the whole of our population, which, I submit, is one of the most practical and direct ways of each assisting the other. And so we go on—subject to the medical profession—to the new National Health Service Act which is to provide for everyone in the land all that medical science can give for the relief and cure of the sufferer. We are coming along, also, with the abolition of the Poor Law system. All these, we believe, combine to stamp out the main causes of destitution and poverty amongst our people. This is an achievement which I venture to say is not equalled, or indeed, nearly approached, by any other nation in the world. That this has been done in a time of unparalleled difficulty is not only the measure of our advancing civilisation, in the best sense of that term, but it is an indication of our profound belief in ourselves, and of our determination and ability to overcome current problems.

In this Bill we have a further measure to extend social amenities to our people and to spread the cost more equitably. This time it is our rating system, with all its anomalies and inequalities, which comes under review. But it is more than that: we are laying the foundations of a system which, so far as is physically practicable, will encourage the provision for everyone of the cultural and health-giving amenities which hitherto have been confined largely to the industrial areas. I submit that, taking the long view of this Bill, it may well be of the greatest value in rehabilitating our I countryside and re-creating a healthy and prosperous agricultural background to our ugly—if utilitarian—industrial areas.

The Parts of the Act which call for special attention are Parts I, III, and IV. Part II, which relates to Scotland, has been dealt with by the noble Earl, Lord Selkirk. His eagle eye has apparently not noticed another injustice to Scotland to which I may refer later. Some controversy may be expected on Part V, especially in relation to Clause 105, which provides temporary grants to county districts. Part VI, which provides for payment of allowances to members of local authorities, should meet with general approval. I want to make one observation on Part VII. In the main, the fundamental changes in the financial relations between local authorities and the central Government are in Part I, although Parts I and III are interdependent and together form the heart of the matter.

Your Lordships' House is often referred to as a revising chamber. I want to make just one point, which I am quite sure my noble friend on this side will concede—namely, that all the revising need not come from the opposite Benches. Much has already been said to the effect that the main purpose of the Bill is to remove or mitigate the grievous anomalies of our present rating system, first by equalizing grants substituted for the block grants and, secondly, by instituting as near as may be a co-ordinated national standard of valuation of property for rating purposes. I submit that no useful purpose is served by dwelling too long upon the anomalies which are inseparable from the transitional period until the national valuation system is in operation, because during that period (as was rightly said by the noble Earl, Lord Munster) there are bound to be anomalies; and the application of Clause 5, which provides for transitional grants, will not in my judgment remove those anomalies.

I cannot avoid the inference that a much longer period than five years will be found necessary if an onerous and unjust burden is not to be suffered by those local authorities which have relatively higher assessment standards than others. It seems to me that the Minister should take enabling powers in this matter until it is clearer than it is to-day that the new principles of valuation are in fact equitable in their incidence upon the local authorities and upon the individual ratepayer. I support the Bill because a start must be made sometime and somewhere. But until the scheme is in full operation—that is to say, until we have a more uniform standard of assessment throughout the country—the equalizing provisions of Part I must be unequal in their effect upon the ratepayer, the person whom the Minister in another place stressed as being the only person who mattered.

I take leave to quote the honourable member for Thirsk and Malton (Hansard of February 24, 1948, column 1844). He produced some striking comparisons of prefabricated houses, houses which might be assumed to be substantially of the same value. I take it that his figures are correct for so far as I know they have not been challenged. It would appear that in Sheffield such a house is assessed at £10 a year; in Merthyr Tydfil it is £7 a year; in Bradford it is £10 a year; and in Hampshire it is £14 a year. The rates paid under the present system by an occupier of this same class of house in Sheffield would be £6 18S. 4d.; in Merthyr Tydfil they would be £5 0s. 4d.; in Bradford £8 17s 6d.; and in Hampshire £10 6s. The same honourable member goes on to estimate the rates that will be paid on those same houses after the equalizing provisions of this Bill are in operation. He gives these figures: in Sheffield the worker living in a prefabricated house will pay £5 1s. in rates; the miner in Merthyr Tydfil will pay £1 13s. 9d.; the textile worker in Bradford £8 1s. 6d.; and the agricultural worker in Hampshire £9 18s. 6d.

If those figures are correct, and assuming that it may be possible to put those houses side by side and to amalgamate the whole of the rates on the four houses, we find that, of the total of the rates paid on those four houses, the miner will pay 7 per cent., the steel worker 20 per cent., the textile worker 33 per cent., and the agricultural worker 40 per cent. If those figures are anywhere near correct, I suggest that they are anomalies to which the Minister must apply his mind. I trust that the noble Lord, Lord Henderson, who has such a wide knowledge of this subject, will look at that aspect of the matter before the Committee stage. I hope, too, as has been mentioned before, that the figure of 70, taken for mileage weighting of population, may not be regarded as sacrosant. The varying methods laid down in the Bill for valuing properties will be fully examined in Committee. I can say only that I knew more about this matter twenty-five years ago than I do to-day. For the moment, I have to rely entirely upon my faith in the Minister and in the belief that he intends to be fair and just. I feel sure that his advisers have satisfied him that everything will come out well in the wash. I confess that I do not understand it.

The importance of this matter to the individual householder is seen from a Fabian pamphlet The Reform of Local Government Finance, which says that for the last year before the war (the fact has already been mentioned this afternoon) the local authorities raised £211,000,000 in rates. Perhaps it enables us to get the facts as between the various classes of ratepayers in their proper perspective when we remember that one half of the rates raised by local authorities were paid by the occupiers of houses of an annual value of £50 or less, and that only 4 per cent. of those rates were paid by manufacturing industries and the railways. Nevertheless, we must retain our sense of proportion. I think the President of the National Association of Local Government Officers was quite justified in claiming that: Local government gives the people of Britain the best bargain they can get anywhere to-day…a bargain which is not only cheap at the price but offers good dividends in health and happiness. The average ratepayer gets the whole of his local government services for about 4s. a week, education for his children at 1s. 6d. a week, health services for 1s. 2d. a week and the free use of libraries for the price of a single newspaper. His house refuse is collected for the price of half a bar of soap, and the cost of the public parks is only the price of one cigarette that an individual might smoke while walking in a park. Street lighting costs him only the price of two flints which he might put in his cigarette lighter.

I turn now to Part VI of the Bill. I am surprised that our Scottish friends did not find hidden away in Clause 131, subsection (9), another injustice to that unhappy land. In that clause, Scottish local authorities are prohibited from holding a licence for the sale of intoxicating drinks, whereas in England local authorities are permitted to hold such licences. Having read yesterday that the Chancellor of the Exchequer told the housewives of Bristol that they must choose between food and curtains, I find it difficult to understand why a Labour Government, of all Governments, in these times of economic stress and anxiety have not the courage to decline to extend drinking facilities, especially when it is desired to attract young people to the amenities envisaged in Clause 131. If for no other reason than that great quantities of good foodstuffs are destroyed in the making of alcholic drink, I should have thought that we should not encourage the further destruction of foods at this time.

Finally, I believe the Bill to be a worthy attempt to place local authority finance on a more rational and equitable basis. That it will be some years before its provisions can be brought into full play is a minor and transient matter. I hope that, in accordance with the high traditions of this House, we shall apply ourselves to a thorough examination of the Bill in all its aspects; and it may be that, being satisfied on its main proposals as a long-term matter, we shall be able to offer some useful suggestions for mitigating the hardships which seem to be inherent in the transitional period.

6.19 p.m.

LORD ADDINGTON

My Lords, after the extremely interesting speech from the noble Lord who has just sat down, there is little I want to say except that I agree with him that our local government services and our social services do give us great cause for satisfaction, and provide a feature of which some of those who live overseas might well take note. I agree that a rather undue burden has been placed on the ratepayers and on those authorities who at present have a fair and right system of valuation for their properties. I will confine myself mainly and as briefly as I can to certain principles, most of which are connected with Part I of the Bill. I fully agree that assistance to the poorer local authorities in the discharge of their functions should be one—but only one—of the considerations in the new arrangements that are necessarily made.

I would urge that there are several principles underlying the present allocations which should be retained, though no doubt they will have to be modified somewhat to meet the new conditions. The first is that the loss of rate income due to the derating provisions of the Local Government Act of 1929 should continue to be made good to local authorities as long as derating of industrial and freight transport hereditaments is continued on the existing basis. If the central Government continue to deprive local authorities of sources of revenue which are so urgently needed, they should surely make good that loss to every single one of those authorities. Then I would urge the continuance of the principle of partnership between the central Government and all local authorities in the provision of services concerned, and that the sharing between them of the expenditure on such services should be continued. Under this Bill there are certain county councils, and a good many county borough councils, who get no share at all of the new equalization grants.

The proportion in which this expenditure should be shared was referred to by the noble Earl, Lord Munster. He pointed out that if the 22½ per cent. laid down at that time had been applied the equalization grant would have been some £10,000,000 greater. The sweeping away of those provisions seems to me to be entirely wrong, and to be a breach of the understanding—to put it no higher—that was reached at that time. I would further maintain—and this, too, is a point that has been touched on before—that the adoption of the average rateable value per head of the weighted population as the sole basis for the equalization grant is both inequitable and unsatisfactory. In many cases, under present conditions, it will not accomplish the aim of the Government to equalize the burden of payment for local services. The noble Lord, Lord Kershaw, has already referred to wide differences in the value of similar houses, and that matter was also referred to in another place. It was stated that the rateable value of a B.I.S.F. house varied between £12 in Walsall, £17 in Wolverhampton, and £24 in Plymouth, and that the rateable value of temporary bungalows varied, as I have it, from £10 in Nottingham to £23 in Middlesex.

The Chairman of the Hampshire County Council, who should be able to speak with authority, pointed out in a letter to The Times that in that county the rateable value of the normal council house of about 900 superficial feet was assessed in rural areas at an average of £14. The average rate being 14s. 9d., the occupier has to pay £10 6s. in rates. In a certain other county, the Chairman pointed out, the average assessment of a precisely similar house was £6 10s., the average rate being 22s. 9d., so that the occupier was paying only £7 8s. annually. So again, as has been emphasized, I maintain that on the Government's own showing, and according to their own principles, it is the former, and not the latter, who should reap the benefit of the equalization grant, which may well be going largely to ratepayers who least deserve it; and this will continue until the new valuations are completed. That is a point about which a good deal has been said.

I consider, too, that local authorities will be inclined to incur extravagant and unnecessary expenditure, knowing that a considerable part of that expenditure will be borne by the taxpayer. I believe that in some areas the proportion will run as high as 66 per cent. There again, I regret that the opportunity has not been taken to find, or at any rate to seek determinedly, some new sources of local taxation. At the present moment, rates are the only source of direct income of local authorities. That seems to me most inequitable. Occupation or ownership of a house is no criterion of ability to pay, and the present system bears hardly on a man with a large family and a small income, and on those who at the present time are forced to live in a house too big or too expensive for them. I think, also, that valuation on the basis of cost, even the 1938 cost, will bear very heavily on the occupiers of these new council houses. The smaller the income, the larger the proportion that has to be paid in rent, and therefore in rates. It is the poorer man who again, as has been pointed out, pays the larger proportion of rates.

This may not have mattered much when local expenditure and rates were low. We had a table presented to us at a meeting of the Buckinghamshire County Council a few days ago. In the early days there was a 3½d. rate and expenditure was about £60,000. In 1933–34, after the Local Government Act had taken effect and new duties were transferred to the county councils, the figure rose to £1,400,000; and the rate was 7s. 3d. In 1947–48. expenditure was just under £4,000,000, and the rate was 12s. As has already been pointed out, expenditure is likely to continue to rise. Reference has been made to the Fire Services, the Town Planning and the National Health Services Acts, and to the Children and National Assistance Bills, as well as to expenditure on education. The Government find new sources of taxation as central expenditure rises. They should surely help local authorities to do the same.

I believe that the associations of these authorities are ready to go into this matter, and that they have already given it a considerable amount of thought. Further, some local authorities—the smaller non-county borough and urban district councils or, rather, the ratepayers in them—will lose heavily by the reduction in the capitation grant under Clause 9 of the Bill. The calculations there are extremely hard to follow, but so far as I can understand the capitation grant, for an urban district or non-county borough it used to be 179d. per head under the 1929 Act, plus a further 30d. under the Act of 1947. With the reduction now proposed it will be 127d. These councils, so far as I can judge, have had little expenditure taken from them—only the small amount on fire services, a little on infectious diseases, the cost of valuations and some subscriptions to voluntary bodies, health services and a few other items. The cost of their own services—staff, sewerage, scavenging, lighting, housing and, in some cases, water supply, et cetera—has risen considerably.

I was talking to the Clerk of one urban authority the other day, and he said that those expenditures had risen 150 per cent. since 1933. These councils and those who live in their areas, so far as I can see, receive no direct share in the equalization grant, and the increase in the district rate for their own expenditure may well be more than the reduction in the county rate in most counties. Their position will be a good deal worse if they are in counties that receive no equalization grant at all. In such cases the ratepayers will have to provide, through the county rate, the full amount of the capitation grant to the county districts. Surely it is unjust to give a capitation grant with one hand and take it away with the other through the county rate. The capitation grant, so far as I am aware—and certainly in Buckinghamshire, the county with which I have been connected for a good many years—has been, and is now being, paid to the county district councils direct. I consider—again personally—that this method of direct payment should be continued. My suggestion is that the effect of this provision should be reconsidered when the accurate facts are available, as will be the case when the figures for the year 1949–50 are ascertained.

Lastly, I believe that certain county districts will suffer heavily owing to the provisions of Part V of this Bill on the rating of transport and electricity undertakings. There is a hard case in my own neighbourhood, that of Wolverton. It is a small urban district with a population of about 15,000 people, entirely dependent on the carriage works of one of the railways. Provision has to be made not only for services for people living in the district who are employed at those works, but also for services for a great many people who come in from outside the district in order to work there. The local council, of course, get no rates from the houses in which those people from outside live. Other towns are in a somewhat similar position, but the fact that works such as these do involve the local councils in considerable expenditure seems to me to have been left almost entirely out of account in the discussion on these provisions.

Of course, I recognise that there are not going to be many of these cases, but I have two suggestions to make concerning them. My first suggestion is that those conducting such establishments as these railway works should continue to pay sums adequate to meet the services provided by these councils direct to the councils concerned, and continue those payments in full so long as the need continues—indeed, I do not see that it can possibly cease to exist during the ten years provided for in the Bill. Then the total of such payments could well be deducted from the amount distributed to local authorities as a whole. Surely, here again, if the payments are to be made by the county councils, the local council in need will have to pay part of it themselves through the county rate. Alternatively I would suggest that these special properties used for the manufacture, repair or equipment of goods should be treated as industrial hereditaments—for that is really what they are—and should, therefore, be excluded from those properties which are no longer liable to be rated.

My Lords, the welfare of local government certainly should not be a matter of dispute between Parties. It is in the interest of the nation as a whole that social services should be largely controlled and administered locally by those with local knowledge and local interests and with a great volume of voluntary service, and that local authorities, every one of them, should be provided with adequate local resources to continue those services and to extend them. I am much, disappointed that the opportunity has not been taken by this Bill to introduce reforms which could have made local government, as a whole, easier to conduct for a great many years to come. This Bill does not seem an easy one to amend, and, possibly, the chance of amending it in this House may be somewhat limited. But I am sure that there are likely to be other points raised in the Committee stage, and I and many others will do our best to make the Bill more equitable and more workable before it leaves your Lordships' House.

6.34 p.m.

LORD LLEWELLIN

My Lords, we have had an interesting though perhaps a somewhat dull debate in this House today. I thought the noble Lord, Lord Kershaw, was raising it to quite different heights when, at the beginning of his speech, he said that countries who think we are "down and out" will take a very different view of us when they hear of the measure which your Lordships have been discussing. It seemed to me a, refreshing thought that once the reports of the proceedings of your Lordships' House are read in the Western Hemisphere, those five Argentinian admirals will be sailing back to Buenos Aires, and the Chilean Navy will be going up the other side of the Andes, knowing that, because we have discussed this measure to-day, they had better lose no time in getting back from the Falkland Islands dependencies; and that even the people of Guatemala will be content to remain within their own frontiers because of our debate here to-day.

LORD LATHAM

Otherwise they might get a grant!

LORD LLEWELLIN

I do not think any grants under this measure should go to foreign countries, although I would not mind seeing British Honduras get a small grant of some sort, because they, obviously, have been very glad of their British connection during the last few days.

I have one complaint concerning this Bill, and I think it is one that ought to be voiced. It is that really this measure comes to us very late. After all, it is a Bill that affects every family and every business in the country, and it is right that some protest should be made that it comes to us only some short four weeks before the time when it ought to be placed on the Statute Book. We had the Requisitioned Land and War Works Bill the other day in circumstances which gave extremely little time for any kind of consultation between the two Houses. That was a bad thing. It is true that we passed it in time, because the Government gave me a perfectly good undertaking which I was very ready to accept. But I am certain that the right way is for Bills of this sort to be brought into this House in time to give us ample opportunity to consider them, especially if they are important measures such as this is. This Bill takes from a number of local authorities the compensation which they were given under the de-rating provisions of the Act of 1929, Those de-rating provisions, I think, have fully justified themselves In those days there were some districts where any new factory was rated so highly that, without industrial de-rating, there would have been little chance of getting new industries into some of our depressed areas. I certainly think—and no one who has beer Minister of Food, I believe, would disagree—that the de-rating provisions applicable to agricultural property were of great value in helping us to get many of our farms into proper cultivation and so augmenting very materially our food supplies, both during the war and in the difficult times which we have since experienced.

It seems to me that in this measure the Government are doing things in too much of a hurry, particularly with respect to the equalization grant. They ought to have waited (a) for the readjustments that are about to be made in local government boundaries, and (b) for the establishment of a system of uniform valuation over the country as a whole. There is not the slightest doubt to my mind, that at the present time the areas that have low assessments will get off well, in any case for a period of four years, and, I believe, for reasons which I shall give, for longer than that. I do not think that this over-all re-valuation can be finally concluded until after the year 1952, and this under the equalization grant envisaged in the Bill rates would go up in quite a number of areas, although in some other areas the proposals would work satisfactorily.

I was interested to hear the noble Lord, Lord Kershaw, quote the case of the "pre-fab" or Portal house—that rather hideous thing with which Lord Portal was unwise enough to allow his name to be associated. I suppose it is no secret that he once offered the then Prime Minister to name it the "Churchill house." Mr. Churchill said, "I had a tank named after me, which has given me nothing but trouble ever since. I am not having a house named after me. Better call it after yourself." It is manifestly wrong that for an exactly similar house a man living in Merthyr should pay only £1 13s. 9d. in rates and a man in Hampshire should pay £9 18s. The noble Lord quoted the difference between an agricultural worker and a miner, but when I think of one old age pensioner living in Merthyr and another living in Hampshire the proposals do not sound much like equalization to me. Euclid would have ended by saying, "And that proposition is absurd." If that is going to be the incidence of this equalization scheme in the intermediate period, I hope the Government will give us an assurance that that kind of case will be started on early in the valuation procedure, so that such anomalies will not last for four, five, or possibly six years from to-day.

Another point I should like to touch on is the sparsity figure. A local authority has to have a weighted population of 70 before getting a sparsity valuation grant. I should like to ask the noble Lord why the figure of 70 has been selected. Under the 1929 Act, the figure was 200; under the 1937 Act, it was 300; and now we are down to a figure of 70. If one looks at the figures given by the Minister of Health in answer to a question in another place on February 17, one finds that there are only three English counties which benefit at all by that proposal, but seven Welsh counties do. As my name perhaps might imply, I am not against Wales, but I certainly think that the figure for sparsity grant is demonstrably low, when we find that Cornwall, Cumberland, the whole of Lincolnshire, and the East Riding of Yorkshire cannot qualify for such a grant. I would point out to noble Lords who are members of the Government that in these days a sparsity grant is necessary not only because long road surfaces have to be kept up, but also because of the amount of transport which has to be provided in widely separated areas to take children to school.

LORD LATHAM

Educational grants.

LORD LLEWELLIN

Of course, that would be paid for partly by educational grant, but is there a specific grant for bus fares? The noble Lord would know better than I do.

LORD LATHAM

I think not.

LORD LLEWELLIN

In those areas, then, there is an extra burden. It is always a dangerous thing to embark on Scottish problems in this House if one does not hail from North of the Tweed, but I must say I listened intently to the noble Lord, Lord Morrison, and I did not gather from him how the 25 per cent. difference was made up. I do not think anybody knows. Somebody has said that this has been done before. That is much like the 11/8oths rule on taxation, which has been in force for such a long time that nobody dares to disturb it, in case an unfairness were done to England—then Scottish Home Rule would really come off! The only difference I can see under the Bill is that in Scotland the local assessment of rates is still to continue. That point was not very well explained by the noble Lord, Lord Morrison. What is absolutely anathema in England is to be allowed to continue in Scotland. The city assessors are to do things in the old way. In England and Wales, however, that procedure is regarded as obsolete. One wonders how Scotland has "got away" with it, but one knows that they always like to continue in their old ways. In this case I am not at all sure that they are not right. They are continuing the old way because it is going to be much more economic, and that appeals to the Scot.

I believe the method of handing this I over to the Inland Revenue authorities will prove much more expensive. I am told a very large staff—some 7,000—will be needed. And there will be this difficulty: that whereas the valuation department can now borrow from other departments of the local authority to help in the quinquennial valuation, it will not be possible for the Inland Revenue Department to do so. They will have to keep adequate staffs to deal with the sudden rush of work on the Department just before every quinquennial valuation. I do not think we shall be able to recruit the good staff that is required to make a good valuation. For instance, I saw that the Mitcham local authority were advertising for a permanent technical man with experience in rating. They said that on the transfer of the corporation's valuing powers under the terms of this Bill, the successful applicant would be transferred to rate collecting or to other duties in the borough treasurer's department. So we are not going to get local authority officers to transfer in vast numbers to this new department, as indeed the noble Lord, Lord Hylton, pointed out.

I think the Treasury would be well advised to employ the big firms of valuers, who used to do a great deal of county valuation, to value great blocks of property and help out the central valuation, especially in the peak time. Otherwise we shall have large staffs doing nothing practically for two or three years while there are only the day-to-day variations in valuations for a few new houses going up. In connection with that, I notice that in Clause 76 of this Bill there is no real appeal on one important point. It is true that the clause sets up, first, the local appeal tribunal, or whatever it is called, and then there is appeal to a County Court Judge. But they have to take the assumption, in Clause 76 (4) (a)—I will not read it—of a figure worked out in a Ministry, on which the whole basis of the valuation depends, and into which somebody outside the Ministry should be able to inquire.

LORD LATHAM

And vary?

LORD LLEWELLIN

Yes; and vary, if it is found to be wrong. Quite likely that will be the most important factor in the appeal. That is one factor which nobody—the valuation officer, the local committee, or the County Court Judge— is allowed to go into. I now come to the question of dwelling-houses. Here I must say that I do not think the provisions will achieve uniformity. It may be that we did not get uniformity on what the hypothetical tenant was supposed to be willing to pay; but, at any rate, that began with a uniform rule. Whether we got uniformity or not, the test for every house was what the hypothetical tenant would be prepared to pay. Now the Government are laying down at least four different tests for the small dwelling-houses.

Pre-1918 small houses, and the large houses built at any time, are still to be on what the hypothetical tenant will be willing to pay. But when we get to the post-1918 houses, we have two different tests, one for the local government house (the noble Lord, Lord Latham, referred to this) on 1938 site values, and one for the privately owned houses on present day site values. The noble Lord rather ingeniously suggested that that was perfectly all right, because the local authorities in the main have had to build in the centre of towns and to pay more for their site. Even so, I do not see why the site should not be assessed on its real value, because the extra site value is a test of its amenity value; and that, of course, includes whether the people who live on it are nearer to the centre of shopping, or to work, or whatever else it may be. I see more divergence than uniformity in the valuation of these different classes of houses at different levels.

I want to say just a word about the electricity undertakings and the railways. They are valued in a peculiar way in the Bill, but it is curious to find that the gas undertakings are not to be dealt with in the same way. I am not going to say much about the basis of the assessment my noble friend the Earl of Munster dealt with that. But it is odd to find that, although there is a particular figure in England and Wales, in Scotland they get away with it by "such sum as is certified by the Secretary of State to be reasonable." We have not the faintest idea what sum he is going to put on these hydro-electric undertakings, or on the railways, so far as they are in Scotland. There it is. I make that passing reference, again, to the difference between the countries.

I want mainly to talk about the distribution of the amounts. As I understand the Bill, the £11,000,000-odd for the electricity, and the other sum for the railways, are to be distributed over all local government areas, irrespective of whether or not those local government areas have one of the main power stations. I think that is wrong. I am not saying that it has been done politically, or anything like that; there is nothing political in it; I just think it is wrong. Take a place like Barking. I am told that the rateable value of all the properties in the district of Barking is £750,000 or thereabouts, and that £250,000 is attributable to the power stations that are in Barking. The Barking rate, I am told, is 20s. in the £. So that by this sum being taken out of the rateable value of Barking that district will receive £250,000 a year less rates. They reckon that they will get back £25,000. Whether they are right or wrong, I do not know. That will upset completely those neighbourhoods where there are big power stations. The noble Lord, Lord Henderson, as I understood him, justified this distribution on the ground that the rates were contributed to by consumers wherever the electricity went. Paraphrasing his argument, I think that is the way he put it. But, that happens in every factory. The contributions to rates that the factory is paying are paid for by consumers, and in some cases by people abroad in Canada, in the United States, in South Africa, and in other places.

It is true that we may distribute some of the £11,000,000 over the country as a whole, but surely the area where the plant is has extra burdens because the plant is there. It has to keep up the roads to it, sometimes for very heavy traffic. Quite likely it will have to carry out some smoke abatement; it will certainly have to provide schools, playgrounds and other things for the people who work in the factory. So it seems to me that the area should get some of this money—some such amount as would be attributable to a factory of similar size if it were in the neighbourhood. I think local authorities who have these factories in their midst will be much more ready to welcome new extensions or, through their town and country planning committee, a new factory. If when a new factory comes to a town they do not receive any benefit from the rateable value, I should think you would have to use compulsory powers, probably in every case, to get the consent for the new factory to be put up. I suggest to the Government most earnestly that they should look and see whether it is fair to distribute these sums over the country as a whole, and whether some part at any rate ought not to go to the area which has the factory.

It is also interesting to note, in passing, that the showrooms and the shops connected with the electricity undertakings are taken out of the local rates. If there are two shops in the high street of a town, one selling or advertising electric cookers, and the other selling or advertising gas cookers, the local authority will take rates from one and no rates from the other, which seems to me slightly odd.

LORD KERSHAW

I hope the noble Lord will make it clear that there will be rates levied in respect of the electricity showrooms.

LORD LLEWELLIN

They come in, of course. I am sorry if I did not make that clear. They are included in this bulk £11,000,000, but the local people do not get anything in respect of that particular showroom. To-day it may be used as a furniture shop, and when the lease runs out the electricity undertaking may take it over. Then, so far as I can see, it has to be deleted from the rating roll of that local authority because it has come into a use for which they cannot rate it, although previously it was a property from which, quite properly, they had been able to claim.

LORD LATHAM

Is that not the case now? The showroom of the electricity undertaking is not separately rated; it is taken within the cumulo of the undertaking.

LORD LLEWELLIN

I think it does, but it does not arise quite so forcefully now because the local authority take the rates on it, and do not have to distribute them over the country as a whole. I think there is a considerable distinction. They are also, of course, rated on their profits, and in a peculiar way which takes in the showroom as much as it takes in the furnaces. But the local authority in whose area there is a showroom receive something directly out of the electricity undertaking because they have the works, or part of it, in their area.

LORD KERSHAW

I am sorry to interrupt but I would ask the noble Lord to make it quite clear that there will be rates levied on the electrical undertakings showrooms. They will have to pay rates; they will not be rate-free. He is rather giving that impression.

LORD LLEWELLIN

I hope I was not giving that impression, because I did not intend to. The only point I was making was that the particular rating authority do not get any rates from it. If it happens that the two boroughs are next door to one another—say Brighton and Hove—and the electricity undertaking selects Hove in which to have its showroom, then that bit of Hove is derated. If it were just the other side of the pier—the noble Lord perhaps knows the pier which separates Brighton and Hove—Brighton would have a bit of their assessable property derated. It seems to me that there should be some direct contribution made to the local authority who have either the showroom—although I am much more emphatic about factories—and the main plant in their midst, and not just distributed pari passu for those who do not get any of the smoke, fumes or lack of amenities which electricity plant or a railway goods yard necessarily involve.

I have taken rather too long, but I would refer to Clause 131, which was put in on the Bill's re-committal in another place. The noble Lord, Lord Latham, said that he thought this would receive unqualified acceptance from the people. Whether he is right or wrong I would not know. I am not completely against this clause myself, but let us see what is the position to-day. Under Sections 254 and 255 of the Local Government Act of 1933, a local authority can produce a private Bill to do any of these objects. That Bill requires the assent of a certain proportion of the members of the local authority and, if necessary, has to go to a local poll. A local poll is a highly democratic form of procedure on one of these Bills. I am not sure that the noble Lord, Lord Latham, was right in saying that this would have the unqualified acceptance of the people. This January there were three private Bills which had these provisions in them—the Birmingham Bill, the Coventry Bill and the Scunthorpe Bill. All three Bills went back under this procedure to the local poll, and all three were defeated. We come in as if nothing had happened and give these local authorities, who did not get the support of their electors on those Bills, an absolutely free hand to go and do the very thing upon which they were turned down.

LORD LATHAM

I really must press this point, because this is not a fair analogy. Each one of those Bills included powers going far beyond, and in addition to, entertainment powers. They went much further than Clause 131.

LORD LLEWELLIN

Perhaps the noble Lord is right, but at any rate these proposals were included; those authorities did not go on with a Bill with just these powers. At any rate let none of us think that this is all new. This could always be done by a local authority before, and there are lots of local authorities who have been doing it. The London County Council—and quite rightly, as the noble Lord said—have put on some very good entertainments in the parks.

LORD LATHAM

But only in the parks—that is my complaint.

LORD LLEWELLIN

They were very good.

LORD LATHAM

They were excellent.

LORD LLEWELLIN

But if they had received the assent of the electors of London under the powers I have mentioned they could have gone further. The noble Lord, for wise reasons no doubt, has never done that, because he did not like to be turned down like the town councils of Birmingham, Coventry or Scunthorpe. If he had, perhaps we should have had them elsewhere than in the parks. The point I want to make on this clause is that I have no great objection to a local authority running a municipal theatre, and putting on good plays in that locality, but I think they ought to do it at their own risk. Where I would draw the distinction is whether they are going to do it out of their own money or whether they are going to finance these risks out of the taxpayers' money. I think local authorities should do these things if they wish, but they should not run non-essential services out of the taxpayers' money and so pre vent some other area from getting an extra share for essential services out of the sum that the Treasury are prepared to put aside by way of subsidy for rates. I certainly think that that clause, which was only an afterthought to the Bill itself, should be amended in that respect.

In regard to the Bill as a whole, I may say that we have no intention of dividing against its Second Reading, although the Opposition did divide against the Third Reading in another place. But there will be points that we shall wish to put on Committee. I am glad to see the noble Viscount the Leader of the House here. As he was not here when I started, perhaps I may repeat for his benefit that I think we have a grievance in that this Bill has come to us so late and that it will be rather a rush to deal with it; we have to work to a very strict date, as the Bill has to be on the Statute Book by April 1. We usually get a fortnight between Second Reading and the Committee stage, and a reasonable time for the Report stage. I assure the noble Viscount that we shall not do anything to obstruct. However, I think this is a perfectly proper protest to make. I would not have repeated it now had I not seen the noble Viscount in his place and I thought he was the right person to whom the protest should be made directly. I conclude by assuring the noble Lord that unless he says something quite unlike him in reply to this debate, he will get his Second Reading to-night.

7.13 p.m.

LORD HENDERSON

My Lords, with regard to the last point raised by the noble Lord, Lord Llewellin, on behalf of my noble friend the Leader of the House I can give him the assurance that we will deal with the matter in the way he suggests. I think this debate has been very interesting and highly informed by the contributions from those who are experts in the matter; and it will have removed any lingering doubts any noble Lords may have had as to the difficulty and complexity of the Bill. I think the great mass of questions, queries and criticisms which have been made prove that the Bill is extremely difficult to follow; and if I were to attempt to answer all these points I fear I should keep your Lordships a great deal longer than you would wish me to do.

I should like, in the first instance, to renew the indirect apology which I made in my earlier speech about the shortness of the time at the disposal of your Lordships' House. The difficulty arises from the fact that the Bill was introduced in this Session and it is governed by the date April 1, which is the beginning of the new year of operation. In those circumstances, it is perfectly true that there is a very narrow time-table, but I am quite sure that the noble Lord appreciates the difficulties and the reasons for them and will accept my expression of regret that there will not be the normal amount of time for your Lordships to deal with a Bill of this kind. Having said that, I hope that there will not be any difficulties arising out of the shortness of time.

Perhaps before I go on to deal with one or two points I should say that I have received an apology from the noble Earl, Lord Munster, who has had to leave your Lordships' House to keep another appointment. I do not propose to attempt to deal with the wide range of problems that have been raised. Many of them, as the noble Lord, Lord Llewellin, himself has said, are going to be raised on Committee stage. I understand that a number of Amendments will be put down, and therefore it will be quite unnecessary for me to cover the ground in detail at this stage. I will, however, deal with a few of the more important points which have been interjected into the debate, and I hope in that way I shall be able to satisfy your Lordships on some of the matters in question.

The noble Lord, Lord Llewellin, raised a point concerning the different methods of valuing the various classes of small dwellings. Your Lordships know that it is difficult, and has always been difficult, to find a fair and just means of valuing these small properties. As I said in my earlier speech, the question of applying the law in its present form was avoided in 1938 by the Government of the day, and they set up a Committee of Inquiry to deal with certain aspects of the matter. But the chief difficulty of having a revaluation before the war was that there was insufficient evidence of rental levels, free of scarcity values, of post-1918 houses. The great bulk of houses erected between the wars were built for sale and not for letting, and it is not unreasonable to describe post-1918 houses other than local authority houses as, on the whole, owner-occupied.

As there was no proper rental evidence for the private houses erected since 1918, there was no true comparison on which to assess. "free market" values for local authority houses. It was therefore necessary to find some basis other than rent for both these classes of houses, and the best one seems to be by reference to building costs in 1938, when supply and demand had reached a balance and building costs had become stable. In fact, the Bill refers to 1937 and 1938 and that is done to make it possible to cut out the increases in cost which had begun in some areas because of the re-armament programme. For all other houses there was plenty of rental evidence, but with a mixture of rent control and some "scarcity" letting, rents for precisely similar houses were very uneven. The method proposed in the Bill is to make an assessment "by reference to" 1939 rents of comparable houses (rents of all "small houses" within the meaning of the Bill were controlled by the 1939 Rent Act from the beginning of September, 1939). This will rule out the inequalities and ought to produce values which are reasonable and equitable in relation to those produced by the 1938 cost basis for the post-1918 houses.

Another point which was raised was, Why was it not possible to defer the operation of the new grants scheme until the new valuation lists were ready? It is, of course, true that for three or four years the equalization grants will be paid on the existing valuation basis, and that on this basis disparities of rateable value will continue to operate. That is admitted, but it is a factor which cannot be eliminated at once, whatever system of grants may be adopted. The ill effects of it are felt under the existing grants system. They are recognised in all quarters, not only in your Lordships' House, but also in another place. They will be ironed out only when we have the results of the new centralised valuation system. In the meantime, some form of grant must be made. The Government feel, despite the difficulties which have been mentioned and which they frankly recognise, that the equalization grants system devised to replace the old block grant system must be brought into operation forthwith. As I said in my earlier speech, it is impossible to tinker about with the existing system in view of the fact that, as a result of the transference of services to the central Government, local authorities are being relieved of substantial expenditure.

The noble Earl, Lord Munster, suggested to-day (and this matter was also raised in another place) that local authorities lose £10,000,000 by the change of system. There is no ground at all for this suggestion. The transfer to the Exchequer of responsibility for the cost of hospitals and out-relief—amounting in 1947–48 to £79,000,000—must clearly be taken into account; and, after allowing for this and for the cessation of the existing block grant, there is a not gain to the local authorities of £58,000,000. The noble Lord, Lord Hylton, asked me where are the artists coming from. He was referring to the staff difficulties which he imagines will be experienced, and which will in fact be experienced, in equipping the new valuation machinery. Let me say at once that the Government are fully aware that staffing and accommodation difficulties will not make it easy to bring the new arrangements into operation. They fee, however, that the picture has been painted blacker than it really will be. The backbone of the new service will be provided by the officers already on this job in the employment of local authorities, and there is no reason to suppose hat the majority of these officers will not be available to the new service.

It is perfectly true that in many cases the officers dealing with valuation are also employed on other work with their local authorities, but it is likely that, for every officer who decides to stay with his local authority because of his other work, there will be another officer who decides to come over to the new service—

LORD HYLTON

I do not think so.

LORD HENDERSON

Would the noble Lord allow me to finish?—dealing for the whole of his time with rating valuation and dropping his other work with the local authority. Then there is a provision in the Bill, which the noble Lord may recall, for the employment of the private valuer in the system. The noble Lord, if I remember rightly, asked me whether the Government were reasonably assured of getting the services that are required. The noble Viscount, Lord Gage, also questioned me on that point. I am informed that we expect to obtain the bulk of staff required from the local authorities. Others will be taken on by recruitment of newly trained people, and it ought to be possible so to organize the town and country planning and rating valuation work in the Inland Revenue Department that, when the town and country planning work is under way, staff will be available for the rating valuation work. That is one of the advantages of having all public valuation work in the, hands of one Department.

The noble Lord also suggested that valuation under the present system could be done in eighteen months or two years. I happen to have with me an extract from The Times editorial (which I believe is quite a reputable source from which to quote) dated November 19, 1947. It is agreed that uniformity could not be achieved in less than three years under the present system, and it is open to doubt whether it could in fact ever be attained while valuation remained a duty of local authorities rather than the State.

VISCOUNT GAGE

Before the noble Lord leaves this subject, can he say what target figure he is aiming at for this permanent service? I think that the Minister, not in the House, said something about 1,700. Could the noble Lord state the number of permanent valuers at which the Government are aiming?

LORD HENDERSON

I am afraid that on a detailed point like that I cannot give an answer now; but I will certainly obtain the desired information in case it is required at a later stage in the consideration of the Bill. Several noble Lords have referred to the question of an average population of 70 per mile in the rural areas. I was asked directly by the noble Lord, Lord Llewellin, "Why 70?" I am informed that the figure of 70 is taken because it is at about this level of sparsity that the degree of weighting provided automatically by the low rateable value per head in the sparsely populated counties proves insufficient to ensure an adequate credited rateable value.

LORD LLEWELLIN

It has changed a lot in the last ten years.

LORD HENDERSON

The effect of the grants is changed under the new system.

LORD LATHAM

Weighting the weights.

LORD HENDERSON

The noble Lord, Lord Addington, and the noble Lord, Lord Llewellin, called attention to the fact that the Bill repeals the guarantee contained in the Local Government Act, 1929, the effect of which was that at each quinquennial recalculation the pool of block grant money would be increased so as to maintain a constant ratio of 22½ per cent. of the total expenditure of local authorities falling to be met out of rates and block grants. I think it must be recognized that a general guarantee of this kind to local authorities as a whole could not be maintained in the greatly changed circumstances; and, of course, with that disappears the arrangement by which the block grant pool represents 22½ per cent. of the expenditure falling on rates and block grants. The relations between the Exchequer and local authorities are being transformed by the Bill, with the declared objective of distributing substantially greater sums to the poorer authorities and none of the equalization grants to the wealthier authorities. In its place, there is a new guarantee, in the new system of equal significance; but it takes a different form. As I have already stated, credited rateable value will not be allowed to fall below what I might call its basic ratio to aggregate rateable value for 1948–49. Therefore, I hope that the noble Lord will regard the fact that there is this new guarantee as justifying the repeal of the old guarantee.

There is one further point with which I might deal. It was raised by the noble Earl, Lord Munster, on the part of the Bill dealing with electricity. The amounts in the Bill are based on the trends since 1934, when the Central Electricity Board were set up and the Grid System began. It was argued that if there had been a general revaluation between then and now the amounts would be higher. But there has been nothing to stop individual local authorities from revaluing undertakings in their areas and, in fact, this has been going on, particularly as new stations have come into operation. Secondly, it is by no means clear that a revaluation now, with the industry nationalized, would result in an increase. The valuation of such an undertaking is based on profits, and the British Electricity Authority will work on a lower profit margin than the present companies. Apart from that, rising costs will tend to reduce gross values, and it is a fact that the valuer dealing with the Central Electricity Board for the Central Valuation Committee has proposed a reduction of 5 per cent. in the gross value of the Board's undertaking for the next rating year.

LORD LLEWELLIN

I am wondering whether the industry loses some of its intrinsic value on being nationalised. I thought it was a very odd argument to hear. Or are we reassured that we are now to get our electricity cheaper?

LORD HENDERSON

No: I am not aware that I said anything about getting cheaper electricity. I am merely giving you the way in which the valuation operates on the new basis. The noble Lord raised the question of the gas industry not being treated in the same way. There again, I should have thought it was perfectly obvious that, while the transport industry and the electricity industry are national industries, in the sense that we all recognise, the gas industry is essentially, even when nationalised, an industry of local components, giving a service to localities and not, in the way that the other two services do, across the country, or across large areas of the country, as a whole. There are a number of other matters that I could have dealt with, but I think your Lordships will agree that I have covered enough points in the winding-up speech and that the remainder of these matters can be left to the Committee stage. If that meets with the approval of your Lordships, I will now ask that the Bill be read a second time.

On Question, Bill read 2^a and committed to a Committee of the Whole House.