LOCAL GOVERNMENT (FINANCIAL PROVISIONS) (SCOTLAND) BILL (Hansard, 2 February 1954)

THE MINISTER OF STATE, SCOTTISH OFFICE (THE EARL OF HOME)

My Lords, I wish I could make this Bill a little less coldly technical than it is, but I am afraid that "equalisation grant" does not lend itself to colour. This Bill will have two main results: first, there will be an increase in the equalisation grants paid by the Exchequer to the local authorities in Scotland: and secondly, there will be a new method of distribution. The proposals contained in the Bill arise out of the findings of a Committee which the Secretary of State appointed to advise him on the application of Part II of the Local Government Act, 1948. I should like to express both my own appreciation and that of the Secretary of State for the friendly co-operation of the local authority representatives who attended that Committee and were helpful all the way through.

I think it may assist your Lordships if I outline how the calculations of the Exchequer equalisation grant are made in present circumstances. Under the present law a grant is payable to each county—including for this purpose the small burghs—and to each large burgh whose financial resources are below a minimum standard measured by reference to rateable value per head of weighted population, that is, population weighted for children under fifteen, and, in some cases, for sparsity of population. The deficiency in rateable value, as compared with the standard, is credited to such counties and large burghs, and the equalisation grant is, broadly equal to the rates which would be payable on the credited rateable value if it were actual rateable value. I hope that that is as clear to your Lordships as it is to me.

My Lords, up to now the standard taken for Scotland has been the average rateable value per head of weighted population in England and Wales, with the addition of 25 per cent. to allow for the general higher level of valuation in Scotland. It has for some time been known and felt by all concerned that this addition was inadequate. But the 596 Committee found it impossible to determine what particular percentage should replace the 25 per cent. in order to make it fair in the circumstances, particularly as revaluation is taking place in England. Therefore the Committee came back to the well-tried, hardy Goschen formula of eleven-eightieths of the English grant. It is therefore proposed in Clause 1 that we should adopt eleven-eightieths. This has the unanimous support of the Scottish local authority associations as an interim measure. Clause 1 makes it retrospective to May 16, 1953. The Secretary of State indicated in another place that whereas the grant on the present basis is £6 .08 million for Scotland it is likely under the new proposals to amount to £8 .17 million. The latest estimate since the Secretary of State spoke in another place is that the grant may be £8 .9 million.

As I have already explained, this sum will be distributed to the local authorities by reference to a standard rateable value per head of weighted population, but the Bill proposes certain changes in the grant formula which will affect various individual local authorities in different ways. At present, the equalisation grant is calculated separately for each county, including the small burghs, and for each large burgh. Out of the county grant, what is known as a "capitation" payment is made of so much per head of population to each small burgh and for the benefit of the landward area. The system of these capitation grants takes no account of the actual needs of the small burghs or of the landward areas. Therefore, Clauses 3, 4 and 5 lay down that there may be separate calculations for each large and small burgh and for each landward area on the basis of need. That would seem to be fairer and more consistent with the principle of equalisation grant than the system which we operate now.

Several consequences and consequential adjustments follow on this provision. First, the joint expenditure of local authorities will be allocated, as I have explained, on the basis of actual rateable value plus the rateable value, if any, credited for purposes of the equalisation grant. Similarly, credited rateable value will be taken into account in distributing the payments to local authorities which are made in lieu of rates by the railways and electricity undertakings. That is covered by 597 Clauses 10 and 11. The same principle will be used in calculating the rate deduction in the education grant formula. Certain difficulties would arise if all these complicated adjustments were brought into full effect in the one year, because local authorities have already, for instance, fixed their rate poundage. Therefore, Clauses 2 and 7 contain certain transitional arrangements which have been made in order to ease the transition from one system to another.

There are two other changes proposed in Clause 4 which I think I should mention to your Lordships. One concerns houses. In ascertaining the rateable value for grant purposes, it is proposed to use, as the rateable value of local authority houses, the average rental of all houses built by local authorities in Scotland. This will have this advantage that from now on the local authorities will be free to fix their rents according to what they think is right without the fear that their share of the equalisation grant will be affected. I think that that is an important and valuable change. Secondly, in the same clause, the formula for the payment of grant is weighted to take account of abnormal increases in population which put costs and heavy charges on local authorities—for instance the development of new towns or industrial redistribution in a particular district.

Scotland as a whole will clearly gain under this arrangement, though in the application of the formula it is possible that certain individual local authorities may lose. As this is a tentative interim arrangement—as I shall explain in a moment—the Secretary of State thought that, until more experience had been gained, it would be wrong that any particular local authority should suffer a loss. In Clause 6 of the Bill, therefore, provision is made to see that no particular local authority would be worse off on the 1952–53 basis than under the present system. I hope that I have made it clear that I think this is a desirable alteration in the system. But it is an interim arrangement because, as your Lordships will, I think, be aware, a Committee, under the Chairmanship of Lord Sorn, is at present examining the whole rating system in Scotland, and this has, of course, an important bearing on the question we are now discussing. Clause 12 of the Bill, therefore, allows for an 598 investigation at any time, and the Secretary of State need no longer wait for the five-year period, as he had to do previously, under the Act of 1948, before he ordered an investigation.

Though not everything in this Bill commends itself to the local authorities, nevertheless, broadly they have accepted it as fair in the circumstances, and I commend it in that way to your Lordships as a fair interim measure. I beg to move that the Bill be now read a second time.

§ LORD MATHERS

My Lords, the first thing I wish to do is to thank most warmly the noble Earl, who has just sat down for the commendable effort which he has made to simplify the terms of this Bill—which I found very difficult indeed. I am not going to attempt anything in the way of an analysis now. It seems to me that in any case that is a Committee matter. May I hasten to say that I use that expression not in any sense as a threat to give the Minister a great deal of trouble when we come to the Committee stage? We shall, however, require to see the Bill more clearly, and to consider what the noble Earl has said, before we are completely satisfied that we can allow the Bill to go through. I am pleased that this measure has come along, because I believe that it marks a step in the right direction. I am glad of the fact that it implements a promise which was made by the author of the original Bill in 1948, that the criticisms which were made of the Bill at that time would, in due course, be examined in the light of experience That experience has been gained over the last few years, and we now have this interim result of the consideration that has been given to the matter. I was glad to hear the noble Earl describe the Bill as an interim measure. Certainly that position has been made clear in the actual text of the Bill, because, contrary to what appeared when it was going through another place, a date is now inserted for the termination of its currency.

I am under several handicaps in dealing with the details of the Bill. Some of them I cannot even understand. I am not a lawyer. If ever the expression that it 599 would require a Philadelphia lawyer to explain the terms of a measure was justified, it is justified in respect of this Bill. I find that my experience of local government, short as it was, was on the wrong side of the Border to enable me to deal fully with the complications of this Bill. For a year or two I was a member of the council of the first city in England on the way from Scotland by the West Coast, Carlisle. There, of course, as in the rest of England, the Goschen formula is unknown. Indeed, it seems to me that nowadays, if it were not for that formula, Goschen would be unknown. We hardly ever hear the name of one who in his time played a considerable part in Parliament. I know of only one instance of his name cropping up in any prominent way, and that is in the name of a little hamlet in what used to be my Parliamentary constituency of West Lothian. Between Broxburn and Uphall there is a small number of houses named Goschen Place. That is the only instance I know, apart from the famous formula for which he was responsible, where the name of Goschen has been perpetuated.

Another thing that makes this Bill difficult for me to follow is the notional and almost hypothetical terms used in it, such as "weighted population," "adjusted rateable value" and "standard rateable value." I should feel more at home if "actual rateable value" and "actual rate burden" were under consideration because then we should be getting hold of concrete things and should know exactly where we stood. Comparisons with England and Wales are involved, of course, but, more important, comparisons are made between different local authorities in Scotland. The blessed word "equalisation" is freely used, but I am afraid that I am not able to discern that equalisation is realised, though I freely admit that those who laboured to produce this Bill were capable people and tried their best in difficult circumstances. Notwithstanding the fact that some extra money was available, there are eighty-seven local authorities in Scotland who get nothing out of it. However, local authorities are not flesh-and-blood bodies, and before I sit down I want to put a real, human case with regard to the incidence of rates.

The Capital City of Scotland, Edinburgh, is denied any part of the rate 600 relief afforded by the Exchequer's subvention of £2 million which the Secretary of State (good luck to him!) has managed to obtain from the Chief Custodian of the British public purse. I want to show how this position appeals to the citizens of Edinburgh, who feel the burden of rates acutely. Edinburgh has long been looked upon as a city where high assessments, high rateable values, prevail. The corollary to that is comparatively low rates, because the high rateable values of houses and other premises make it possible to meet the financial needs of the city out of a lower poundage rate. Therefore, the unthinking onlooker from outside Edinburgh says that it is a very lucky city. But it does not prove to be so. I remember discussing with a colleague the relative merits of Edinburgh and Kirkcaldy. I was standing up for Edinburgh and my colleague was lauding the charms and benefits of Kirkcaldy. When we came to discuss the houses in which we lived, my colleague claimed that he had as good a house as mine, with the same amount of accommodation, although his was a bungalow and mine a terrace villa. But our discussion brought out the fact that his house in Kirkcaldy was assessed at an annual value of £23, while mine in Edinburgh was assessed at £65.

I do not want to make out for a moment that this situation is completely typical and is met with throughout Scotland, but these figures apply to the citizens of Edinburgh. The result is that the last remaining member of a family, usually a woman, living alone in the house that she has known all her life and existing, as many maiden ladies who are left on their own do, on a meagre fixed income, finds herself in dire straits. What is the remedy for her position? Is she to sell the house? That would be a heartbreak to her; and, in any case, where would she go if she sold her house? Had she sold her house two years ago, she would have been able to get a much better price for it than she would get to-day, because of the fall in value of house property. If her poverty were sufficient, she could probably claim relief from rates: but the type of individual I am thinking about would rather die than make a claim of that kind. I believe that I cite a case which is not uncommon. So far as I can see, however, this Bill does not touch individuals in that position.

601 All this, I think, points to the need for a complete overhaul and simplification of rating in Scotland. People should know exactly where they stand in respect of rates and what they are paying for. The noble Earl has made reference to the Sorn Committee. I look forward with keen anticipation to the findings of that Committee. I had the opportunity of working with Lord Sorn on another Committee some years ago on the same subject. However, that Committee had greatly restricted terms of reference compared with those of the present one. My experience of working with Lord Sorn, is that we may look forward with confideice to a comprehensive and helpful review of the position in which we find ourselves to-day in regard to Scottish rating, which has been a matter of dissatisfaction over a long period.

I have already made reference to the fact that this Bill is terminable in five years' time. I say most urgently to the Government: "Do not wait for the expiry of that five years. The Bill is valid for that time, but do not use the whale of the period." The matter of Scottish rating is of great urgency, and it is important that it should be on a better basis than we have known it in our time. If I dare make the appeal to the noble Earl, I would use words to him that are not my own, but those of old Omar himself: Ah Love! could thou and I with Fate conspire To grasp this sorry Scheme of Things entire, Would not we shatter it to bits—and then Re-mould it nearer to the Heart's Desire! I am glad that this Bill has come forward. I am sure that we shall examine it with the utmost care in order to get the best out of it that we can, and we look forward to the further steps that are to be taken by the Government, and which, indeed, are promised, to deal with the question of Scottish rating.