LOCAL GOVERNMENT (FINANCIAL PROVISIONS) (SCOTLAND) BILL (Hansard, 7 May 1963)

§ LORD CRAIGTON
I am sorry that the noble Lord, Lord Hughes, cannot be here to move his Amendment. What he wishes done is important to the Scottish local authorities, and I hope that the Committee will forgive me if I reply as though he had moved the Amendment as forcibly as he spoke about this matter on Second Reading, because (though we do not agree with him) he regards the putting off of the date of coming into operation of Clause 3 as exceedingly important. After the Second Reading, I talked to the noble Lord and promised him that I would examine this point most carefully. I have done so, and I am bound to say that I do not find this to be an Amendment that should be made. Although I 560 will quote some figures to support this contention, the real argument here is not one of timing or figures but one of principle.
The Government are being asked, in effect, to put off the operation of Clause 3 for three months in order to give local authorities time to take the necessary steps to enable them to get their rents up to 85 per cent. of gross annual value by August 29. In showing why it is not right for this Amendment postponing the effect of Clause 3 to be accepted, I must give the background to the clause and say why it is being introduced at this particular time and in this particular way.
As I said on Second Reading, the purpose of Clause 3 is not to raise rents, but to restrict Exchequer liability where Exchequer grant is paid on housing deficits due to the charging of unreasonably low rents. The clause originated from the 1960–61 Report of the Public Accounts Committee, published in the middle of 1961. There they recommend in terms that early consideration should be given to the exclusion from the calculation of Exchequer equalisation grant for housing deficits which are due to the charge of unreasonably low rents. It was announced in November, 1961, that my right honourable friend the Secretary of State accepted this recommendation, and that fresh legislation would take effect in May, 1963, after consultation with the local authorities. At about the same time the Secretary of State was making it clear to local authorities that he regarded gross anual value as a guide to reasonable rent.
The first chance to legislate was this Bill, published in October last year, as we had promised in 1961 to do, and this Bill had its Second Reading in another place last November. The Bill continues Exchequer equalisation grant, with some changes, and operates from the beginning of the year commencing May 16, 1963. In the Bill we set the standards against which the actual rent incomes should be set, and not a target that authorities have to achieve. We are not making authorities charge rents above or at a certain level. We are saying simply that if their rents are below that level it is not right that the extra housing deficit should rank for grant. If the majority of ratepayers wish to continue these low rents, that is up 561 to them. It is within their control. The taxpayer was contributing through Exchequer equalisation grant, and now he is protected.
What matters is that the Secretary of State should fulfil his undertaking to the Public Accounts Committee at the earliest possible opportunity, which is the beginning of 1963–64. I know that the noble Lord, Lord Hughes, made the point that some of those local authorities who have not raised their rents already will find it difficult—though few indeed will find it impracticable—so to raise their rents for the remainder of 1963–64 as to achieve an 85 per cent. average during the whole year. At first glance, this worried me, too, as the noble Lord knows. But on careful investigation I am convinced that this is not a good case at all, for two reasons.
First, there are, I am informed, quite a number of authorities, who, when they became aware of these provisions in the Bill, raised their rents so that they will achieve the 85 per cent. average for 1963–64. The warning was there for all to read; and they heeded it, even if they had not heeded the advice so often given, that gross annual value was, in the Secretary of State's view, a guide to reasonable rent. Those who find themselves—those with whom the noble Lord is concerned—in the temporary difficulty that this Amendment seeks to overcome, cannot really blame the Government. The Government gave them ample warning and these people have failed to heed it soon enough. There are always exceptions, but I must also make the general point that, over Scotland as a whole, to achieve the 85 per cent. figure rents would have to go up only to 90 per cent. for the last nine months of 1963–64.
Secondly, I have looked most carefully into the financial effect of accepting or rejecting the noble Lord's Amendment. The reduction of grant is, as he said, not the shortfall between actual and notional rents, but only the percentage of grant for that authority in that shortfall. I calculated what reduction in grant under Clause 3 the more badly placed authorities—those with low rents and receiving a high percentage of grant—could have if they simply increased their rents to the 85 per cent. mark for the last nine months of the year. The figures brought out show reductions, broadly, of the order of £2,000 to £10,000—that is, about 1 or 2 per cent. 562 of the total grant amount they receive. One of the cities which the noble Lord mentioned, Aberdeen, would show a deduction figure of £7,000 out of a grant of £530,000; one county, Stirling, £12,000 out of £550,000, and another, Lanark, £16,000 out of £2 million.
But there is another significant set of figures which the Secretary of State could not ignore. These are the amounts which, as the Public Accounts Committee noted, represented an unfair burden on the taxpayer. Even on an 85 per cent. basis (and one could make it worse by taking it on a 95 per cent. basis, which the Bill ultimately seeks to attain) some authorities have been receiving in past years large sums simply as a result of charging what from the point of view of this Bill are unreasonably low rents. For example, the city that might lose £7,000 next year got in that way £26,000 in 1962–63, and the county that might lose £12,000 got £53,000, and the one that might lose £16,000 got £80,000. Of course, as I say, if we made the figure 95 per cent. the calculation would be worse.
I am entirely satisfied that in no case would any reduction of grant, consequential on Clause 3, represent a sufficiently serious hardship in 1963–64—and that is the only year affected—to justify the action suggested by the noble Lord, even if no prior warnings had been given. Nor, though I have examined them—and I have no doubt that the noble Lord would have raised them again to-day—do I find anything misleading in the statements of Scottish Ministers in another place. They were made in the context of the provisions of Clause 3, which were there for all to read, and many local authorities read them. Nor is there any serious point, as he suggested in his Second Reading speech, in the late addition of the second table. Its effect can be, in terms of grant lost, only very marginal, and for those who have so far failed to take action it may be to their advantage.
I trust that I have given an adequate answer. Those (and I sympathise with the noble Lord who moved the Amendment) who understand the mysteries of local government—and among them I include the noble Lord, Lord Hughes—know that my arguments are sound. The procedure by local authorities when a Bill is presented, and before it is passed through every stage, is well known. The 563 consequences of inaction here, for whatever reason, are, in terms of money, only fractional. I am grateful to the noble Lord, Lord Hughes, and the noble Lord who moved this Amendment, because the Amendment, and the speech I have made, will highlight the wisdom of early action by those concerned; and I trust that after the explanations I have given the noble Lord will feel able to withdraw his Amendment.

§ LORD HUGHES
I must apologise to the House that an engagement elsewhere, helping Fife County Council to attempt to attract industry to Fife at the Exhibition, has delayed me longer than I expected. I do not now wish to press the Amendment, for reasons which have emerged since discussing it, although I think the reasons which persuaded me to put it forward, and which I have no doubt my noble friend Lord Shepherd has advanced, were perfectly sound: that to a certain extent the Government were trying to persuade the local authorities that by taking advantage of this measure they can get something which time alone will prevent them from getting the advantage of.
Since going further into the information I received from the noble Lord, Lord Craigton, on the operation of the Exchequer equalisation grant, I am firmly convinced that in this measure the Government are perpetrating a piece of sharp practice on the local authorities in Scotland: because it does not matter what they do; they are not going to get anything out of the measure. If I understand the scheme properly—and I ought to, after all the briefing I have had from the officials from St. Andrews House last week—this is not a measure to increase rents but a measure to protect the Exchequer against having unduly to subsidise local authority rents by taking into account the housing deficiency payment as an element for the payment of Exchequer equalisation grant.
The Bill lays down certain percentages which local authorities must attain, and, so far as I can see, whether they increase their rents to attain these percentages or whether they do not, at the end of the day they will be in exactly the same position. They are going to lose exactly the same amount of Exchequer grant either way, because either they will have 564 the grant deducted since their rent has in fact reached the figure of 85 per cent. or upwards, or it will be deducted because a notional figure of that amount is put in its place. So that there is nothing which Scottish local authorities can do to retain the amount of Exchequer equalisation grant they are getting at the present time so far as the housing deficiency element of finance is concerned.
From that point of view, I think the Government, either wittingly or unwittingly, have persuaded the local authorities that by doing certain things for rent they will get more Exchequer equalisation grants than they otherwise would do. The fact remains that that is not the position. The only additional income local authorities will get will be the income they get from putting up their rents. That may or may not be a good thing, depending entirely on the level of the rents at the present time. But, as has been borne in on me by the Secretary of State, that is beside the point. This is a measure to reduce the amount of grants being paid out, and, having ventilated the subject, having shown, on the one hand, that by the timetable it is impossible for the authorities to benefit from these percentages and, on the other, that, in any event, so far as the grant is concerned they are in exactly the same position at the end of the day, I beg leave to withdraw the Amendment.

§ EARL ALEXANDER OF HILLSBOROUGH
I would only ask the Minister, who has made a very long and clear statement on this matter, that we might have an opportunity of examining it, and do as my noble friend now suggests, and allow the Amendment to be withdrawn. If anything further occurs to us about it we can indicate to the Secretary of State and perhaps consider it on Report.

§ LORD HUGHES
What may be appropriate is an Amendment in a quite different form at the next stage.

§ LORD CRAIGTON
My Lords, it is normal, I understand, to move that this Report be now received. There will also be a Third Reading. I should like to know whether noble Lords opposite would like me to move that the Report be now received, in which case we can discuss on Third Reading the point which the noble Lord raised.

§ EARL ALEXANDER OF HILLSBOROUGH
It is a question of time and the Business of the House. If there had not been such a controversial point arising from Scotland on this Bill, perhaps we should be in a different position. But if the Leader of the House would agree, I should prefer that the Report stage take its usual form and that we should now go on with the rest of the Business to-day.

§ LORD CRAIGTON
My Lords, it occurs to me that for the local authorities to be paid grant this Bill must receive the Royal Assent by the 16th of this month, and I understand that it is not correct or allowed to have the Report and Third Reading together. Delay might therefore occasion very great difficulty for the local authorities: we might not have authority to pay them grant if we were to delay the Report stage at this juncture. So if your Lordships do not mind, I think I must take the responsibility for saying that we can, if necessary, carry out any procedures on Third Reading in this House. I must take personal responsibility for moving now, That this Report be now received.

§ EARL ALEXANDER OF HILLSBOROUGH
My Lords, I have no objection to that course, if my noble friend is aware that he can come back on his point at Third Reading and, if necessary, move an amended form of Amendment.

§ THE LORD PRESIDENT OF THE COUNCIL AND MINISTER FOR SCIENCE (VISCOUNT HAILSHAM)
My Lords, it is possible on Third Reading to move an Amendment in this House, although we do not normally do so.

§ LORD HUGHES
My Lords, I think that in the circumstances which the noble Lord, Lord Craigton, has indicated the Government will obviously be obliged 566 to give consideration to any reasonable Amendment which is proposed on Third Reading. We do not know whether they will accept it, the Government not always being reasonable; but that is a different kettle of fish.