§ 2.50 p.m.
§ Order of the Day for the Second Reading read.
§ THE MINISTER OF STATE, SCOTTISH OFFICE (LORD STRATHCLYDE)
My Lords, I rise to move that this Bill be now read a second time. The Bill has two main objects: to re-rate industry to 50 per cent. of net annual value, and to reform the present system of Exchequer grants, chiefly by replacing certain grants in aid of specific services by a general grant. The reasoning behind these measures was set out in the White Paper on Local Government Finance in Scotland which was published in July last year. Their underlying purpose is to give local authorities increased financial independence and to encourage local Government electors to take a fresh interest in local government affairs. While there may be some dispute about the method which we have devised to achieve these ends, your Lordships may well agree that they are worth achieving. The Bill has already been debated for no fewer than twenty days in another place—and I willingly admit that it has been improved in some respects. It has also received a great deal of attention outside Parliament, and this is particularly appropriate since the subject matter of the Bill affects all local authorities in Scotland.
No one would wish to dispute that local authorities, in the discharge of the important tasks which are conferred on them by Statute, must receive assistance from central funds. There is, however, room for argument about the proportion which the Government subvention should bear to the total revenues of local authorities. As your Lordships are aware, in recent years local authorities have received an increasing proportion of their revenues direct from the Exchequer, and a great deal of this Exchequer assistance has been given in the form of percentage grants on the expenditure incurred by local authorities. It is difficult for anyone to maintain a healthy interest in getting value for money if someone else is footing his bills, or a fixed percentage of them, and it seems to the Government that one of the results of local 1116 authorities' increased dependence on ad hoc grants has been the apathy and lack of interest at local government elections which I am certain all of us must deplore, no matter to what Party we may belong.
There does not seem to be any easy cure for this, but our view is that interest in local affairs can be revived by allowing local authorities a wider field from which to raise their rate revenue and by giving them assistance from the Exchequer, so far as possible, in lump sum payments which they may spend as they think fit.
This brings me to one of the main proposals in the Bill, namely, the re-rating of industry. De-rating was introduced in 1929 at a time of severe economic depression. To-day's economic climate is happily quite different, and it would not appear that the de-rating of industry to 25 per cent. of net annual value is still justified. It is obviously a question of judgment as to how far industry should be re-rated, and the Government are confident that at the present time the decision which they have taken, which is to double industry's rateable value by re-rating to 50 per cent. of net annual value, is the right one. Effect is given to this in Clause 7, which will create additional rateable resources in every local authority area in Scotland.
While the matter I am about to refer to is really one for another place, I should perhaps explain at this stage that, in fixing the total of the general grant for the first year—which will be 1959–60—it is proposed to take account of this additional income produced by re-rating. Half of that must go to the Exchequer to offset the loss in taxation; it is proposed to give local authorities two-thirds of the remainder; and the effect of the operation on 1956–57 figures, is to give Scottish local authorities an additional three-quarters of a million pounds a year.
May I now turn to the reform of the grants system? There are two alternatives. Grants can be given for specific services on a percentage basis, as at present, or they can be absorbed in a single general grant which would be given in aid of local authority revenues generally, as the Bill proposes. The existing system of ad hoc grants inevitably carries with it the meticulous 1117 scrutiny of each claim by the local authority for a percentage grant, while the knowledge that a fixed percentage of the total will be footed by the Exchequer tends to remove from local authorities the incentive to carry out a prudent husbandry. In our view, therefore, there is a clear balance of advantage in rolling up as many specific grants as possible into a single general grant and giving it to local authorities as the State's contribution towards the cost of providing the relevant services.
Clause 1 accordingly provides for the payment of general grants in lieu of the specific grants at present payable in respect of the expenditure set out in the First Schedule. The clause also provides that the aggregate amount of the general grants should be fixed, after consultation with the local authority associations, for periods of two or three years at a time; and that they should be embodied in general grant orders which will be laid before another place together with a White Paper explaining the considerations which have led to the fixing of the particular amount contained in the order. Your Lordships' House will have an opportunity, if desired, of debating this White Paper.
The distribution of the general grant between local authorities is to be governed by the Second Schedule. In the preparation of the formula contained in this Schedule we had the assistance of a Working Party of local authority officials. Its purpose, as I have indicated, is to get the distribution of grant away from the conception of a percentage of whatever the local authority chooses to spend, and to base it on objective factors of local need, such as population, numbers of children of school age, and sparsity. The Third Schedule provides for adjustments in the amount of general grant in respect of some special items of expenditure which are shared between local authorities or incurred by the Secretary of State on their behalf.
Clause 2 prescribes in detail the various factors which the Secretary of State is required to take into consideration in fixing the aggregate amount of the general grants. I invite the particular attention of the House to this, one of the crucial clauses in the Bill. Under the clause, the Secretary of State must take into account three things: first, the 1118 latest information about the rate of expenditure on the relevant services; secondly, any change in the demand for these services so far as the change is attributable to circumstances prevailing in Scotland as a whole which are not under the control of local authorities—there we have in mind such things as an increased demand for educational services brought about by an increase in the school population—and, lastly, the need for developing these services and the extent to which, having regard to general economic conditions, it is reasonable to do so.
Your Lordships will also note that subsection (2) of the clause empowers the Secretary of State to make an amending order increasing the total amount of the general grant payable in a specified year or years of a grant period, if he is satisfied that there has been an unforeseen increase in the cost of providing the services in question which is of such magnitude that it ought not to fall entirely on local authorities. I hope that the House will agree that this clause gives as fair and explicit an undertaking as any Government could give that the needs of local authorities will be fully met under the new system. I would wish to emphasise that there is nothing in the Bill to justify the allegations which have been made that the general grant is a device to enable the Treasury to reduce local authorities' revenue. My Lords, the Bill is not a '"Smiler with the knife under the cloak"—I do not claim that for myself; I am told that it comes from Chaucer's Canterbury Tales.
Clause 3 gives the Secretary of State power to reduce the general grant payable to any local authority Where the service in question is not adequately provided, and it also enables him to prescribe standards. The existence of this power will, I think, be sufficient in itself, and I am confident that—as in the case of the existing power in relation to the Exchequer equalisation grant—it will not be necessary to invoke it. I hope, however, that the existence of this sanction, together with the explicit undertakings in Clause 2 to which I have already referred, will be sufficient—and in our view they certainly ought to be—to allay the anxiety, which has so frequently been expressed by educational interests, that the effect of the Bill will be to reduce the standard of local government services. 1119 Clause 4 provides for the abolition of certain minor grants. Credit will be given for them in the first general grant order; and their disappearance will remove the need for much time-wasting examination of accounts.
Before I leave the question of the general grant, I should perhaps mention to your Lordships the transitional arrangements. These are to be found in Clause 15 of the Bill. In order to avoid any undue disturbance as a result of the introduction of the general grant, where losses occur they will be made good in full in the first year of the new system, as to nine-tenths in the second year, and so on for such period as may finally be decided on by the Secretary of State. The losses will be made good by the gaining authorities, but the effect will be that no one will lose anything in 1959–60, although many authorities will gain from the £750,000 to which I referred a few minutes ago. That will be received in full in the first year of the new system. In the year 1960–61 no authority will lose more than one-tenth of its loss as determined under the clause. The arrangements for tapering off the transitional payments in subsequent years are left by the clause to be dealt with by regulations, as revaluation under the Valuation and Rating (Scotland) Act, 1956, may alter the whole picture in 1961–62.
Clause 5 provides for the abolition of the Education (Scotland) Fund, from which the education grant is at present paid, and Clause 6 gives effect to amendments of various enactments which are required consequential on the new grant arrangements, and which your Lordships will find set out in the Fourth Schedule. I have already referred to the re-rating provisions contained in Clause 7. Clauses 8 and 9 make two minor amendments to the Valuation and Rating (Scotland) Act.
I now turn to Part III of the Bill. Clause 11 makes permanent the Secretary of State's control over borrowing by local authorities. This power at present depends on annual renewal under the Expiring Laws Continuance Acts, and it is now proposed to make it permanent. I appreciate that at first glance this may seem to be an odd provision for this Government to introduce. The House may agree that it will clearly be necessary for some time to come, in the in- 1120 terests of the stability of the national economy, for the Government to control the very considerable volume of capital investment which is created by local authorities. Since no end can be seen at present to the need for exercising this power, it is in our view only honest to make it permanent now. To rely on annual continuance implies that there is at least a possibility that the power will no longer be needed at the end of the year in question. That is not the case as regards borrowing control, and Clause 11 takes the realistic course of placing the power on the Statute Book in permanent form, as in England and Wales.
I should like to refer to some of the other provisions in the Bill which become possible when borrowing control is made permanent. Clause 10 removes the rating limitation on expenditure by town councils on halls for public meetings and assemblies. Clause 12 extends the maximum borrowing period for a wide variety of purposes, and Amendments will be tabled for the Committee stage to widen the scope of this clause still further. In that connection I would refer your Lordships to paragraph 6 of the new White Paper entitled Local Government and Central Departments.
Clauses 13 and 14 contain minor reforms which should be of financial benefit to local authorities. Clause 13 extends the powers of trustees to lend money to local authorities. This amendment of the law is in essence a reciprocal action with England and Wales, and a corresponding provision is contained in the Local Government Bill to which your Lordships' House gave a Second Reading last week. Clause 14 empowers the Secretary of State to increase certain registration and marriage fees by regulation. Nearly all these fees are received by local authorities. Most of the present fees were fixed as long ago as in the year 1854, and to-day meet only a fraction of the cost of the service.
I do not need to take your Lordships through the formal clauses of the Bill. I should, however, draw the attention of the House to further important relaxations contained in the White Paper published last week on Local Government and Central Departments in Scotland. As my right honourable friend, the Secretary of State, forecast some time ago, 1121 we have carried out an exhaustive review, in consultation with the local authority associations, of the relationship between the central Departments and local authorities in Scotland. The outcome of this review—which I have discussed with the local authority associations and which I am glad to say they accept—is embodied in the White Paper. This document marks an important stage in our relations with local authorities, and its proposals will give them substantially more freedom than they have exercised in the past. As regards capital expenditure, which is referred to in paragraph 5 of the White Paper, my right honourable friend intimated to local authorities last week an important simplification of the procedure for considering applications for borrowing consent. In particular, there will no longer be any scrutiny of applications for consent for projects costing less than £5,000—provided, that is, that the total amount of investment available for the service in question allows; and the procedure for larger applications will be simplified.
Other proposals contained in the White Paper include the abolition of the requirements that local authorities must set up particular committees to carry out certain functions, and that they must provide detailed administrative schemes for these functions and submit them to the Secretary of State for approval. The procedure for examining local authorities' accounts for the services covered by the general grant will be greatly simplified, and a number of important changes are also proposed in the regulations made by the Secretary of State under the Education (Scotland) Acts. In so far as these proposals involve legislation, Amendments to give effect to them will be laid before the House at the Committee stage when there will be an opportunity of discussing them in detail.
Meanwhile, I can say with some confidence that the introduction of this Bill, the publication of the White Paper, and the Government's determination to put the recommendations contained in it into effect at the earliest possible opportunity, are a clear sign that we mean what we say and that we intend to give local authorities more freedom to manage their own affairs. My Lords, I commend the Bill to you. I beg to move.
§ Moved, That the Bill be now read 2a (Lord Strathclyde.)1122
§ 3.10 p.m.
§ LORD GREENHILL
My Lords, before I comment on the speech made by the noble Lord, perhaps I should say that any views I may express are the reflection of my own experience as a member of one of the four city councils of Scotland and that I do not regard myself as competent to express the views of members of county councils. I would add, in my opening remarks, that I am rather disappointed with the speech made by the noble Lord because, in spite of the twenty days which he told us was spent in another place debating this Bill, so far as I can judge he has shown little evidence of having been convinced by some of the arguments expressed in the other place. Noble Lords should bear in mind that although a Local Government Bill was debated in your Lordships' House last week, that was an English Bill and included two matters which do not appear in the Scottish Bill. That Bill not only contained financial provisions very similar to those explained by the noble Lord but also dealt with local government reconstruction in England and Wales, a matter about which Scotland is not concerned.
It may be, as the noble Lord has said, that a good deal of anxiety has been expressed outside Parliamentary circles and I believe Her Majesty's Government ought to ask themselves why it is that, in spite of the explanations given in another place both by the Minister of Housing and Local Government and by the Secretary of State, the public are by no means convinced that the purpose of the Bill is in favour of the local authorities. I believe that it is not an exaggeration of the state of mind of the general public to say that the feeling is that Her Majesty's Government, in the pretence that they are now giving greater independence to local authorities, are, in effect, saying to local authorities: "You have the power to do anything you like, provided you do what we tell you," because there is no doubt that these financial provisions do tighten up the powers in favour of the Government and against the interests of local authorities.
This is not a completely new matter raised by Her Majesty's Government. Not only is it part and parcel of a long record of financial changes which Her Majesty's Government have tried to put 1123 into operation, but if one looks a little further back one realises that this is one of the many changes which have taken place within recent years both in the scope of local government and in the relationship between local government and the Central Government. One has only to refer to the local government manpower inquiries which took place, I believe, from 1949 to 1952, when similar problems (not perhaps wholly concerned with the same financial considerations) were considered between the staff of the Scottish Office and representatives of local authorities. The considerations which they had before them were not merely manpower questions but included also questions of grant, methods of allocation and so on. I should say that this whole Bill deals mainly with administrative matters, and for that reason I do not think we ought to concern ourselves, in a Second Reading debate, with some of the detailed items to which the noble Lord has referred.
I should prefer to deal with one or two headings. Re-rating is one of them. As the noble Lord well knows, there has long been an agitation that the re-rating should be 100 per cent. When, after considerable pressure, Her Majesty's Government at last conceded that industry should be rated to the extent of 50 per cent., instead of 25 per cent., we were more or less grateful for being given "half a loaf"; but it was not the whole loaf for which we had asked and to which we thought we were entitled. But then Her Majesty's Government said: "Notwithstanding that we have increased the rating of industry to 50 per cent., you are not going to get that difference of 25 per cent. at all. Instead of getting the £2⅓ million to which Scotland as a whole would have been entitled by this increase, the second 25 per cent., you are to get only one-third of that amount—some £750,000—for the whole of Scotland".
I want to ask Her Majesty's Government upon what grounds of principle and equity—they say local authorities are not entitled to the whole of the increase which they have agreed industry should pay. I do not agree that industry would have suffered had it been rated at 100 per cent.; nor do I think it wholly a good thing that we should have waited 1124 until 1958, after some of the "boom" years of the 1950s, before industry was made to pay its fair share of the improvement in trade. But in good trade or in bad, the rates that industry pays are surely part and parcel of the local revenues which a town council or a county council ought to receive, precisely because, as the local authority, they have to incur expenditure through the existence of these industrial premises within their area. I believe, therefore, that Her Majesty's Government ought, if they will, to reconsider this deduction of part of the moneys which are really due to local authorities.
The general grant position is one on which perhaps I do not take quite the extreme view taken by a number of people of whom I know. This is not the first block grant within my own experience. I know that the original block grant of 1929 was meant to cover certain items which were not covered by the present general grant. I do not say that such things as the rating and other factors within that block grant were kept as was originally promised; but that was not due to any dishonesty on the part of any Government: it was due to war conditions and the like, about which no one can complain. When we come to the proposed new general grant, however, I believe that there is every justification for the anxiety which is being expressed, particularly by those interested in education—not merely those professionally interested, but those citizens outside who, like myself, are also interested in certain aspects of the subject.
Why is there this, as I think, genuine and reasonable anxiety about the future of education because of this general grant? I think I am right in saying that, altogether, eleven services are involved in this grant. The police are excluded; so are certain other matters. But I think I am right in saying that, of the total of approximately £37 million for these eleven services, about £33 million is in respect of education. I ask, in all seriousness, whether the Government can really say that it is right to make one grant in respect of the whole of these services, when education accounts for so large a proportion of the total concerned. Later, I propose to make a suggestion of my own about possible reconstruction; but for the present, I ask simply: Upon 1125 what grounds of principle do the Government say that there should now be one grant for the whole of these eleven services combined, when one service accounts for such a very large proportion of the whole amount under consideration?
We have been told that one of the aspects of this matter which has concerned the Government is the fact that the ratio of Exchequer grant to local rate has gone up considerably; that, whereas (I think this is the expression of the Secretary of State) some thirty years ago the ratio was one part Exchequer to two parts rating, it is now six parts Exchequer to five parts rating. Again I ask: Upon what principle do the Government say that that ratio is unreasonable? What difference, again in principle, would it make if the ratio were either one part Exchequer to nine parts rating or nine parts rating to one part Exchequer? This is not a matter which is being decided on principle at all; it is simply that the Government want, as I see it, to have the minimum of expenditure imposed upon the Exchequer and the maximum met by the local authority.
Here I should like to give an answer which has nothing whatever to do with Party politics. Some years ago, when a senior member of the City Chamberlain's Department in the Glasgow Corporation was lecturing to members of the City Chamberlain's staff on this very question of grants, he put a point of view which I think is wholly reasonable and which certainly had no Party-political significance. It was this: that the reason why Government contribute towards the expenditure of the services of a local authority is the fact that the services in question are as much national in character as they are local, and therefore there is an obligation on Government to contribute at least one half of the total cost in order to show their responsibility for a service which is as much national as local. I am perfectly sure that the noble Lord will not deny, so far as education alone is concerned, that at least one half of the cost of our education is a national responsibility.
There is one other point to which I should like to refer. The noble Lord is well aware that, as the outcome of the Report of what is called the Sorn Committee, 1126 the Rating and Valuation (Scotland) Act was introduced, and it has a bearing upon the equalisation grant. Some of us who were concerned with that Committee thought we saw, in the recommendations of that Committee, a source of considerable increase in income, purely from the equalisation of grant. As the noble Lord is well aware, Scotland has a particular grievance in that respect—for this reason. In the first instance, when this grant was being determined the old kind of formula was adopted (Goodness knows where it originated!) of adding 25 per cent. to the average of the country in order to determine the datum line. The noble Lord knows that as well as I do. A certain amount of money came to Scotland because of that arbitrarily chosen figure. It was found, after very short experience, that the amount was inadequate, and so we had a second bite at that cherry and the amount of equalisation grant given to Scotland was increased, if my memory serves me, by about £2 million.
That, too, being obviously inadequate, a later review took place, and I think I am right in saying (the noble Lord will correct me if I am not right) that, whereas in 1955–56 the amount in respect of equalisation grant was about £9 million, the year after it was something like £14.4 million. There had been that readjustment. Now, in spite of that, we are told that the figure of equalisation grant for Scotland is not to be determined at present, notwithstanding that we have this new Valuation and Rating (Scotland) Act on the books, but that we must wait until dilatory England and Wales have arrived at their figure and their valuation. When, after over a quarter of a century, that is ultimately decided, and when the Exchequer see what the total figure of equalisation grant will be, they will be good enough to give to Scotland what they regard as its fair share.
§ LORD STRATHCLYDE
My Lords, before that can be decided we have to complete our own revaluation, which will not be until 1961 or 1962. I would further observe that it was not this Government which introduced Exchequer equalisation grant; it is this Government which, as far as it has gone at present, has put right the difference which existed and added to the 25 per cent., for which we in Scotland are very grateful.
§ LORD GREENHILL
My Lords, far be it from me to claim credit which is not my due, and far be it from me to cast blame on the Government for which they are not really liable. But I would point out that the whole idea of equalising the burden upon local authorities was due to a political friend in another place; and although it may not be working as was originally envisaged, at least let us give him credit for having introduced that principle of equalisation.
The noble Lord has referred to the most recent White Paper. He will be well aware that, even in circles which normally support the present Government, there has been a doubt either about the importance of that Paper or about the new methods of relationship with which it deals. But I was rather impressed by one part of this Paper in which, after outlining the details of administration and referring, in paragraph 7, to other services—I will not read out the headings of all of them—it said:Although individual projects of the kind"—the kind referred to—may often be small the total investment which they involve is too great to be exempted from the general restrictions applying to all local authority investment.The noble Lord told us that one of the things which the Government have decided upon is that local authorities will no longer be able to raise money for capital purposes on their own initiative. The noble Lord is well aware that already under the 1929 Act a local authority could not raise money for capital expenditure unless a two-thirds majority of those voting approved of it; and, as the noble Lord is also aware, there are not many local authorities in Scotland whose political composition is such as to make a two-thirds majority the opinion of one political Party only. Looked at purely from the point of view of administration, which is what I am concerned with at the moment, I think it unfair so to tie the hands of local authorities that, even within the limited sphere which the Government have so far allowed them, they are not able to exercise that local individuality which, surely, even the present Government will agree is part and parcel of the inherent democratic atmosphere of our country. I cannot help wondering whether the 1128 noble Lord is wise. After all, what it means is an even tighter financial hold that the Government already have on local authority expenditure.
If I may trespass on your Lordships' patience for a moment or two longer, I should like to say this. We are bound to agree that changes take place and that to some changes there is always some feeling of resistance. But I think that now and again we ought to face the possibility that a change may be desirable. Exactly thirty years ago there was a conference on local government affairs, held under the auspices of the Institute of Public Administration, in which the opinions there expressed, strangely enough by three eminent Scotsmen of the time, make one feel that they were faced with problems of a similar kind to those that we are dealing with to-day.
As noble Lords are aware, in the pre-1929 days education, as such, was under a separate body, as were public assistance and other services. They were undertaken by separate individuals and covered by separate elections; each service was under an ad hoc body. Since the 1929 Act, when education and the other services were all combined under the one local authority, I have wondered whether Tom Johnston was not perhaps right in thinking that the time had come to revert to ad hoc education committees. The effect of that would be, I think, that we should then get people elected to education committees whose interests were primarily educational and who would therefore, on the whole, be those who knew most and cared most about it. My feeling is that it would be an experiment well worth discussing in the near future. From that one might lead on to the further point: that if there are not enough men and women available to go round, is there any reason why each ward in a large city should have three representatives rather than two or even one?
These are thoughts that I throw out because I think in this present time of change it may be appropriate that they should be discussed. Having said that, and realising that noble Lords are perhaps much more concerned to hear what the noble Earl the Leader of the House has to say, I will end on that note.