LOCAL GOVERNMENT BILL (Hansard, 10 June 1958)

§ THE LORD CHANCELLOR (VISCOUNT KILMUIR)

My Lords, I rise to move that the Bill be now read a second time. It will be generally agreed, I believe, that the time is ripe for a comprehensive reorganisation of local government in England and Wales. I think it is true to say that there has been no thoroughgoing reform of the main structure of local government since the 1890's.

There have, of course, been changes in detail, such as the reviews of county districts carried out in the 1930's, and there have been changes in the financial basis of local government of a somewhat limited and piecemeal character; but no effective general reconsideration of the whole organisation of local government has been carried through.

I feel sure, too, that there will be broad agreement that what is required is an overhaul and improvement of the present system of local government, rather than its replacement by something entirely different. The two Local Government Commissions to be established by the Bill are enjoined to secure "effective and convenient local government", and this requirement epitomises the objects of the Bill. In the financial field, the Government's aim has been to strengthen the local character of local government by giving the authorities greater responsibility over the spending of money on the services which they provide in their areas.

Let me outline at once the main provisions of the Bill by which we have sought to achieve these objects. Even this, I fear, will take a considerable time. The financial proposals are contained in Part I, which provides for changes in the rating system and for a recasting of the system of Exchequer grants, the most important change being the introduction of a new general grant to county and county borough councils in place of a number of specific grants in aid of particular services. I hope to be able to show your Lordships that all of these changes are designed to further the object of increasing the responsibility of the local authorities to manage their own affairs.

623 The financing of local government services now rests overwhelmingly on Exchequer grants and rates—in that order. In the last year for which detailed figures are available, 1955–56, the total income of local authorities in England and Wales on revenue account was £1,147 million, of which £500 million took the form of grants from the Exchequer, while rates produced £421 million. The remaining £226 million represented income from rents, trading services and other miscellaneous items. The Government have reached the conclusion, after a most careful study of other possibilities, including the suggestions of the group of the Royal Institute of Public Administrators, that the path we should pursue is that of strengthening the present bases of local government revenues, rather than seek to devise some new sources of revenue.

As I have said, we have concentrated our attention on improving the existing sources of revenue—rates and grants. In the matter of rates the main adjustment proposed by this Bill is the re-rating of industry and freight-transport from 25 per cent. to 50 per cent. of net annual value. Industry's share of the total rate payments rose by half as much again following the revaluation of 1956, and re-rating to 50 per cent. on top of that, as we now propose in this Bill, will have the result that industry's share will have increased three-fold since the year 1955–56. In the present economic situation, and having particularly in mind the effect on the costs of exported goods, this seems to the Government to be as heavy an addition to overheads as industry can safely be required to bear.

We are also proposing in this Bill some changes in the basis of rate contributions of the electricity and gas industries. These changes will not materially affect the total contributions made by these industries, which are, in the Government's view, soundly based, but they will result, we think, in a rather more equitable distribution of these contributions among the local authorities. I would also draw your Lordships' attention to the proposal in Clause 10 of the Bill which provides for the separate assessment of electricity and gas show-rooms so as to bring them fully into line with the rating of other shop premises.

624 I turn now to the changes in the grant system. The present methods of determining Exchequer contributions towards local services have grown up over the years, and no one can claim that they follow any discernible general pattern. The great majority of the grants are percentage grants—that is to say, the Government pay a fixed proportion of the expenditure incurred by each local authority on the service concerned; but the rates of grant vary on no logical principle from one service to another, and the methods of calculating the Exchequer share vary in detail between one grant and another. In the Government's view, this method of contributing to local expenditure is not conducive to that independent and responsible local administration which it is the Government's prime aim by this Bill to foster.

Percentage grants have the result that the more an authority spends, the more the contribution received from the Exchequer. I would ask your Lordships to consider whether such a system is compatible with objectivity in local financial administration. I would also ask you to consider whether it does equity between authorities well endowed with rate resources, who can well afford to earn the higher grant which accompanies higher expenditure and those less well financially endowed, to whom the residual burden falling on the rates, even with the grant, may well be a powerful deterrent against undertaking worthwhile but costly developments.

The Government seek by this Bill to give a large proportion of Exchequer assistance towards local authority services in the form of a general grant. The principle here is that the amount paid to each individual recipient authority should depend not on the amount the authority spends, but on needs, and that the money provided by the Exchequer should be available in the hands of the authorities to apply as they think best in providing the services. The Exchequer money will thus be made available in a form which will encourage authorities to consider the financial aspects of their transactions without the bias that is apt to be associated with percentage grants—a bias created not by the intrinsic merits of particular proposals but by the incidence of grant. Moreover, authorities will be stimulated to administer their services so as to obtain 625 the best possible value for their expenditure, since the benefit of any savings resulting from efficient administration will accrue to the authority itself and will not be shared, through a percentage grant, with the Exchequer.

My Lords, you may ask me what assurances there are that the total amounts made available by the Exchequer under a system such as I have described will represent a proper contribution towards the local services. And you are entitled also to be assured that the basis of distributing Exchequer aid among the authorities is soundly conceived. I hope to be able to show your Lordships that the Bill contains satisfactory provisions on both these important matters. The total of the general grant is to be fixed for periods of two or more years, in advance, and Clause 2 of the Bill contains directions to the Minister as to the manner in which he is to address himself to the fixing of the annual totals. The Minister is required to take into consideration the latest available information of the rate of expenditure on the services covered by the grant and also the current level of prices, costs and remuneration; he is to have regard to any probable fluctuations in the demand for the services. Then he is to consider the need for developing those services and the extent to which, having regard to general economic conditions, it is reasonable to develop them.

The basis of distribution of the grant to individual local authorities is set out in Clause 1, subsection (2), and in Part III of the First Schedule to the Bill. I will not weary your Lordships with a detailed exposition of the distribution formula, which we shall no doubt be examining more closely in Committee. But we have sought to identify the factors which have a necessary effect on the cost of providing services—such factors, for example, as the size of population, the proportion of schoolchildren to population, sparsity of population, high population density and so on. The Bill does not, however, determine the relative values to be attached to any of these factors. These weightings will be settled afresh for each grant period, and the formula is flexible enough to enable the changing conditions to be taken into account in fixing the distribution for any year.

626 I would invite your Lordships' attention to the procedure which the Bill lays down for settling such important matters as the total grant for any year and the detailed basis of its distribution. There is to be consultation with the local authority associations, and the Minister's conclusions are to be embodied in a general grant order which will not have effect until it has been approved by a Resolution of the House of Commons. The order will be accompanied by a report setting out the considerations which led to the particular provisions contained in the order. Your Lordships will see that all this is in Clause 1 of the Bill.

I do ask your Lordships to consider objectively for a moment whether this completely open and orderly method of determining the needs of important local government services and the proper measure of Exchequer aid towards them has not much to commend it, compared with the present method. A valuable feature of the method now proposed is that it will afford regular opportunities for a survey of progress and proposals for development of such important services as education, health, welfare, child care and fire services.

Your Lordships may wish to have some explanation of the method by which the services to be covered by the general grant have been selected. These services are described in Parts I and II of the First Schedule to the Bill. The Government's approach has been to include all those grants where the service is provided over the whole country on a reasonably uniform basis—obviously, we could not include in a system of general grants distributed to all county and county borough councils a service which operated only in certain parts of the country. The second condition is that the need for expenditure on the service must be capable of being reflected reasonably as between one area and another in the sort of objective factors which go to make up the formula for distributing the grant. Thirdly, we have looked for services in which there is real room for local discretion and initiative in local administration.

I am, of course, aware that fears have been expressed, particularly by teachers and others concerned with the education service, but not, I am happy to say, by the County Councils Association or the 627 Association of Municipal Corporations (which are the associations representing the local education authorities), that this system of general grant will operate to the disadvantage of the services. In part, these fears are founded upon a complete misinterpretation of the Government's motives in introducing this new system. Fear has been expressed that proper provision will not be made from central funds towards the carrying out of these services.

I hope that I have shown your Lordships that the Bill does contain appropriate and proper provision to ensure that the total aid made available under the general grant will take full account of needs, including the need for developing the services. My right honourable friends, the Minister of Housing and Local Government and the Minister of Education, have also given categorical assurances of the Government's intention to make a proper contribution towards the development of the education and the other services concerned.

For the rest, these fears that I have mentioned seem to depend on an assumption that local authorities will not, unless they are able to share every penny of their expenditure with the Exchequer, devote adequate funds to maintaining proper standards in the provision and development of the services. My Lords, I say at once that the Government's proposals are based on a different concept of the sense of responsibility of local authorities towards the important duties that have been entrusted to them. We think that these authorities, stimulated and encouraged by the lively public interest which services such as education and health always attract, can be relied on to apply themselves responsibly to these matters—and all the more so, now that we are proposing by this Bill to take them out of leading strings.

Of course, there must be safeguards to protect national standards, and these are the power to make regulations laying down standards and powers to withhold the grant under Clause 3, in addition to other powers such as exist under the Education Act, 1944. I should like to emphasise that these powers of central supervision will be limited to what are sometimes called the "key points" in the services—that is to say, those matters which are properly of national concern. 628 One of the difficulties about a percentage grant system is that it necessarily involves the Government Departments in reviewing in great detail, first, the need for, and, secondly, the amount of, expenditure to which they are contributing. One of the useful by-products of the new system of general grant will be that the attention of Ministers and their Departments will be concentrated on the matters which are of true national concern. The Government are confident that this will strengthen and not weaken the partnership between central and local government.

Before I leave the subject of the financial provisions of the Bill, I should like to draw your Lordships' attention to the useful improvement in the distribution of the important exchequer equalisation grants—which are now to be renamed rate-deficiency grants—provided for in Clause 5 and the following clauses of the Bill. These are now to be available directly to county districts. These changes in rating and in the grants system will, of course, affect the finances of individual authorities to varying degrees. Overall there will be a gain to local authorities of an amount which, on the basis of the illustration contained in the White Paper on Local Government Finance in which the Government's proposals were first published, will be equivalent to a rate of 4d. in the pound over the whole country. It is undeniable that some authorities will be somewhat less well off under the new arrangements, but some—a much greater number, I am glad to think—will be better off.

Important changes in the basis of local government finance cannot be made without gains and losses of this sort arising. The Government are, however, satisfied that the Bill will generally create a more equitable distribution of resources than exists at present. Nevertheless, they have thought it right to include in the Bill provision for a transitional scheme under which the financial effects of the Bill will be graduated over a number of years. This scheme provides for contributions to be made by gaining authorities to those which are estimated to lose under the Bill, the contribution being such as to meet the whole of the estimated losses for the year 1959–60 and 90 per cent. of the losses in 1960–61. The duration of the transitional scheme for years after 1960–61 is not provided for in the Bill, but will, under Clause 15, 629 be determined by regulations which will be subject to the Affirmative Resolution procedure. It will be necessary to gauge the effect of the revaluation for rating due to take effect in 1961 before these matters can be completely settled. For your Lordships' convenience, I would draw your attention to the hypothetical illustration of the financial provisions of the Bill which my right honourable friend had prepared for the use of Members of Parliament.

My Lords, the financial provisions that have described in Part I of the Bill, important and useful though they are in themselves, are, of course, only one part of the Government's comprehensive scheme. It is not solely a question of seeing that local government obtains and safeguards its monetary resources in what we believe will be a better way than at present. We must also ensure that it is organised, so far as its structure is concerned, so as to enable resources to be used to the best advantage. Responsibility in local government must be matched by effectiveness and convenience—as regards both the provision of local services and participation and access by those served. And so we have provided, in Part II of the Bill, for a comprehensive system of review, and reorganisation to whatever extent may be found necessary, of the structure of local government throughout England and Wales.

My Lords, as I have already said, the need for a review of this kind has long been accepted. It stems from the simple fact that during a half-century of rapid, complex and far-reaching changes generally, the pattern of our local government organisation has changed but little—and then only piecemeal. Many boundaries are now plainly unrealistic; many areas are divided into too many units of separate administration; and there is a growing number of communities who feel that they have outgrown the limitations that at present exist on their powers of self-government. There is also wide agreement as to what the review should aim at: to bring the system of local government up to date, preserving its essential features, rather than replace it entirely by sonic new and alien scheme of things.

This being so, the Government have felt it right—and I make no apology for this—to base the provisions of this part of 630 the Bill very largely on the "Proposals Agreed Between Representatives of Local Authority Associations", as set out in the Appendix to the White Paper on Local Authority Areas and Status, published in July, 1956. The problems and the policy outlined in that White Paper have been discussed widely since that time, and the Government believe they can fairly claim that the provisions now being considered by your Lordships are, broadly speaking, acceptable to the great mass of public and local authority opinion in the country, and not merely to those who specialise in the study of local government from the outside.

Of course these provisions in Part II are, essentially, machinery provisions. We could not hope, here in Parliament, to find out by ourselves just what is needed for the local government of each area in the infinitely varied circumstances of our counties, our cities and towns, and our rural communities, throughout the country. What the Bill does is to provide for a series of reviews; then for orders to be made by the Minister of Housing and Local Government following those reviews; and thirdly (I stress the importance of this) for Parliament to have an opportunity of approving or rejecting each such order, in the light of the report of the review on which it is based.

The first reviews will deal with the pattern of the major units—the counties and county boroughs—and also with the whole complex of local government in the great conurbations, which in the Bill are referred to as "special review areas". Your Lordships will see the machinery and powers for this purpose set out in Clauses 17 to 26 of the Bill. Two Local Government Commissions are to be set up, one for England and one for Wales, and constituted as provided for in the Fourth Schedule. My Lords, may I break off for one moment on a personal point? My noble friend Lord Brecon is, unfortunately, ill, and he has asked me to say to your Lordships how disappointed he is that he cannot be present during this debate. He promises his earnest study of what is said in your Lordships' House, especially from the Welsh point of view.

These Commissions will be empowered to propose, within the range prescribed, whatever changes in those fields may be found desirable in the interests of effective and convenient local government; and 631 then it will be open to the Minister, subject in each case to Parliamentary agreement, to give effect to the proposals by order, with or without modification. My Lords, let us consider what may happen. It can be expected that these reviews by the Commissions will lead, in some cases, to alterations of county boundaries, and possibly even to amalgamation of certain counties or creation of new ones. But whatever the outcome, as soon as the future pattern of county boundaries outside the conurbations in any part of England or Wales has been settled one way or another, then each of the county councils concerned will have to carry out a review, and propose any necessary alteration, of the pattern of its county districts—non-county boroughs, urban and rural districts, and the rural parishes as well. Your Lordships will see that the provision for these reviews by county councils, and for ministerial orders to implement their findings, is made in Clauses 28 to 33, and that subsequent reviews of the same kind will be possible at intervals of not less than ten years, on the direction of the Minister.

I come to consider a suggestion that has been made in some quarters, namely, that the county councils should not be left with the task of reviewing their districts, but that it should be given, instead, to the Local Government Commissions to carry out at the same time as they are dealing with the boundaries of the counties and county boroughs. The Government cannot accept this view. We believe that, outside the conurbations, which I will deal with later, the best people to look at the district organisation in a county are the county council themselves, who know the area, the people, and their local government problems.

I now come to the conurbations, the special review areas, which are, of course, a very different matter. In each such area you have a number of county boroughs with a larger number of county districts, big and small, usually belonging to more than one county, lying between and around the boroughs. All these communities form part of one great urban agglomeration having prima facie interacting needs and problems; yet they at present possess a local government organisation which, to put it mildly, seems not very obviously adapted to their special situation. In such a case, the 632 Local Government Commission must, clearly, examine together all the different types of local authority, and also the degree of co-ordination existing or needed in their services, as part of one comprehensive review. Your Lordships will find the special review provisions for this purpose set out in Clauses 19, 20 and 26.

I must draw your Lordships' particular attention to Clause 20, which is designed to meet the possibility—I put it no higher—that the Commission examining a special review area might believe there was a need for smoothing out the existing mixture there of one-tier and two-tier government, and moulding it into a special conurbation county within which there are no completely autonomous units. We must see that, for the complex problems of these conurbations, bold solutions are available if needed—even though it may be found on review that, after all, something less bold will suffice.

There are only five areas which have seemed to the Government, on present evidence, to need special review as conurbations, and these are defined in the Third Schedule. But your Lordships will see that there is power in Clause 17 to add to their number if the Commission for England find a need for this, and power in Clause 25 to vary the extent of an area that is thus subject to special review, if in the course of the review itself this is found to be desirable. These powers are, of course—I emphasise again—subject to Parliamentary control by Resolution.

I would also invite your Lordships' attention to the safeguards which the Bill provides to ensure that these reviews, whether by Commissions or by county councils, cannot result in hasty or arbitrary charges smuggled through without Parliamentary discussion or proper scrutiny. I have tried to epitomise this because it is a point of importance. There are, first of all, the question of the independence and stature of the Commission, subject only to guidance as to the general considerations which the Commissioners must take into account. This guidance will be given in regulations approved by Parliament under Clause 36; secondly, their consultation with local authorities; and thirdly, the requirement to put out provisional conclusions and hear comment before making their final proposals. 633 Then there is the further requirement that the Minister, in turn, must make the final conclusions and reports known, and must hear objections, probably by way of public inquiry. Finally there is the Parliamentary control of any action which the Minister may take.

Clause 29 sets out the safeguards, of a broadly similar kind, that will apply to the conduct and implementation of the reviews of the districts by the county councils. In Clause 30 there is also a special safeguard for use in the remote contingency of a county council's falling down on this job altogether. In such a case, the appropriate Local Government Commission can be put in to do the review of the districts over again, in the county council's stead.

The rest of Part II consists primarily of provisions filling in the details of this scheme for reviews by Commissions and county councils, and at this stage of our consideration of the Bill your Lordships will not desire me to go into all these matters, or into the minor connected matters in Part IV of the Bill and the Eighth Schedule. I shall therefore mention only two points of special interest: Clause 34, which deals with the creation of new county boroughs, and Clause 35, which concerns the limitation of alteration of local areas or status by Private Bill procedure for fifteen years.

It is only right that I should invite your attention to the way in which this Part of the Bill can affect boroughs. The Bill is so framed throughout that there can be no disappearance of a borough except where its area becomes part of a larger borough. This principle will operate even in the difficult case, in a rural area, of a small borough which is felt to be not strong enough in these modern days to continue as a separate county district but yet has no urban neighbour close by with which it could be amalgamated so as to form an enlarged municipal corporation. In such a case, the Bill will allow of the inclusion of the borough in a rural district, although I would point out that no arbitrary figure is fixed and everything relevant will be considered before this can happen. I also want to make it clear that the borough and council, as such, will remain—with a charter, mayor, regalia, corporate property, and so forth, but it will lose its county district functions.

634 The provisions to secure this are in Clause 28 (3) (b) and the Seventh Schedule. May I just mention, to get it out of the way for our present discussion, the position of Greater London? The Bill excludes the metropolitan area now being examined by the Royal Commission under Sir Edwin Herbert from the provisions of the Bill until the Royal Commission has reported. Provision is made for certain possible actions after the Report is received.

My Lords, I explained earlier that Part II of this Bill was complementary to Part I, in that both sets of provisions aim at modernising and revitalising our local government system. I ask your Lordships now to bear with me for a short time further while I touch on the main provisions of Part III—because these provisions, also, are part of the same grand design. They illustrate the Government's recognition of the importance of the word "local" in our concept of local government. They provide, in Clauses 45 to 50, for devolution of the health and welfare functions of county councils to the councils of the larger county districts—but, here again, not in Greater London, unless so applied by Order in Council. Similarly they provide, in Clause 51, for some increase in the number of "excepted districts" enjoying devolution of county education functions under the Education Acts. Boroughs and urban districts with at least 60,000 population, and other districts where there are special circumstances to justify it, will be able to take over responsibility, by means of delegation schemes, for the management of these county services in their own areas.

Your Lordships will readily understand why it is only the larger districts that can be provided for in this way: the size and complexity of the services concerned speak for themselves. It was against that background, also, that the Government concluded that the devolution desired would have to be by way of delegation, and not by a complete transfer of all responsibility. Education, health and welfare services need to be planned and paid for on a county rather than a county district basis and scale. Nevertheless, it is intended, by means of the delegation schemes to be approved by the Ministers concerned, to ensure 635 that—subject to the county council's control of broad policy and finance only—each county district council exercising delegated powers in these fields should have the widest possible measure of autonomy in local policy and management.

My Lords, a measure of this kind, which contemplates important changes in the detailed organisation of local government, necessarily contains a whole lot of detailed provisions which it would not be possible or desirable to mention in the course of a Second Reading speech. But I have, I think, given an explanation of the main features of the Bill, and I hope that I have been able to show your Lordships that the scheme fits together into a satisfactory comprehensive plan for creating a vigorous and efficient local government system. The Bill is a first step forward to that objective, and the work over the next few years of filling out the details of the design will demand the critical attention of all who have the interests of local government at heart. I commend this Bill to your Lordships as a measure which creates the opportunity for a real step forward in local government. I am sure that it deserves the support of all who wish to see effective and responsible local administration of local affairs. I beg to move that this Bill be now read a second time.