Rates Reform

HL Deb 26 March 1986 vol 472 cc1400-55

3.2 p.m.

Lord Marshall of Leeds rose to call attention to the burden of rates and to the case for spreading this burden in a fairer and more equitable fashion; and to move for Papers.

The noble Lord said: My Lords, before speaking to the Motion standing in my name on the Order Paper I should like to thank all those who have put down their names to speak in this debate this afternoon. Had I not known of their sincere interest in the subject and their expert and especial knowledge of it, I might have been tempted to compliment them on their unselfishness, perhaps their masochism, in remaining here for this debate on the very day that the House goes into its Easter Recess.

I deliberately drafted the Motion in the most general terms in order that the whole canvas of the financing of local government could, if required, be debated. Although I did not specifically aim the Motion at the Green Paper, neither did I intend to exclude it from deliberation in the debate. Rates account for 10 per cent. of all taxes levied. They represent the local contribution towards financing local government whose expenditure represents over a quarter of total public expenditure and is 11 per cent. of the GDP.

In 1984–85, local government provided £45 billion worth of services; but how fairly was the cost of those services spread, and what degree of relationship was there between payment, on the one hand, and the user, on the other, and, indeed, entitlement to vote? I hope I can secure agreement on all sides of the House that something needs to be done to improve the arrangements for the financing of local government. By the time we reach the end of this debate I should like to think that we could also reach some broad agreement on the form the improvements might take.

However, before focusing on possible changes in the financing of local government, perhaps we need to spend a little time on the case for change. We all know that the rating system pre-dates organised local government, as we know it, by almost 300 years. The rating system was in operation during the reign of the first Elizabeth, even though there was no organised, countrywide system of local government in this country until the Municipal Corporations Act of, I think 1875, and when the 1888 Act established the county councils. However, the rating system has repeatedly come under pressure during the 20th century and has been, I think, under continuous pressure since 1974; for the burden of domestic rates, due partly to an over-narrow tax base, is at present unfairly concentrated on too few shoulders. Annual rate increases, particularly when they are well above inflation, exacerbate the problem for those who pay rates, whether domestic or non-domestic.

In the latter sector, the high level of rate poundage can be a compelling reason why some businesses decide to close down and move away and why others are simply not attracted to set up business in such highly rated or (should I say?) over-rated areas. Ironically, those are generally the very areas of the country which are currently in decline. Only a few days ago, a northern businessman was quoted as saying that a heritage of penal rate rises had discouraged the area's hard-hit industry.

These pressures will not simply go away. We have to do something and we can only do something that will work when we have decided what sort of local government system we want. The Layfield Report spelt out the broad choices that were available in 1976, and those choices are still relevant. We have to decide whether we want the main responsibility for decisions about the levels of local services and the costs of those services to lie with central or with local government. We cannot choose, as the Labour Government did in the late 1970s, a middle way. There is no middle way except one which confuses responsibility and obscures accountability. We have to choose whether we want local government, on the one hand, or local administration of national services, on the other. When, and only when, we have made that choice we have to look for the most appropriate way of financing the system that we have chosen.

I hope that we shall choose local government rather than local administration. If we do so, we have to accept that local government should be responsible for raising most of the money which it spends; we have to accept that local government should draw as much as it can of that money from as wide a group of the local electorate as possible; and we have to ensure that local government can be held accountable locally for the consequences of its policies on both spending and service conditions.

The present arrangements for the financing of local government simply do not meet those objectives. Central government put in too much of the money, and in addition the way in which government put in much of that money, through the block grant system, leads to massive swings and inconsistencies from year to year. There is ample proof of that in the rate changes for the coming year.

In order to demonstrate this point, I ask your Lordships to look for just a moment at how the block grant distribution, which is the biggest single source of grant-aid to local authorities, has changed between 1985–86 and 1986–87. The total overall has not changed very much. In 1985–86, Parliament voted for £8.489 billion of block grant as part of the rate support grant settlement. For 1986–87, Parliament has voted £8.280 billion of block grant, which is a reduction of just over £208 million, or 2.5 per cent. But the distribution of that money from one settlement to the next has changed dramatically.

Perhaps I may give the House a few examples of this change. London's grant is up by £175 million, or plus 14 per cent.; the metropolitan areas' grant is down by £116 million, or minus 4 per cent.; the non-metropolitan areas' grant is down by £264 million, or minus 6 per cent. At individual authority level, the changes from one grant settlement to another are even more marked. Let us take the case of three London boroughs. Islington is up by £21.2 million, or plus 71 per cent., from £29.8 million to £50 million; Lambeth is up by £19.2 million, or plus 36 per cent., from £53.2 million to £72.4 million; Kensington and Chelsea is up by £13–5 million, or plus 84 per cent., from £16.1 million to £29.6 million.

Let us look now at three counties which represent very different organisations of London government. Hertfordshire is down by £18 million, or minus 30 per cent. I shall not give the actual sums. Surrey is down by £13.7 million, or minus 38 per cent.; Essex is down by £11.4 million, or minus 99 per cent. I know that those figures are only snapshots at one point in time, but they demonstrate the volatility of the grant system, and it is the volatility of the grant system which flows through into rates. Because grant is such a major source of local government funding, swings in grant are reflected in swings in rates, which may have less to do with the council's own spending decisions than the uninitiated observer might suspect.

Let us look again at those three London boroughs. They have all recommended a reduced rate for 1986–87, as follows: Islington down 18 per cent.; Lambeth down 3 per cent.; Kensington and Chelsea down 26 per cent. Some commentators will claim that this has been made possible by the reduction in the GLC precept, owing to abolition. Others, somewhat cynically, will point either to the London borough elections in May or to creative accounting—and your Lordships will understand what I mean by "creative accounting".

That is the effect on the three London boroughs, but what has been the effect on the three counties that I specified. They have all recommended increased precepts. Hertfordshire is up by 21 per cent.; Surrey is up by 12 per cent.; Essex is up by 18 per cent.

It would not be fair to say that the size of government grants and the volatility of the grant system put pressure on rates and to leave it just like that. One could not make such a statement. The fact is that the rateable value base itself is seriously flawed. There has been no domestic rating revaluation in England since 1973 and a rating revaluation of non-domestic properties is long overdue. It is doubtful whether it will be possible to carry out a comprehensive revaluation of domestic properties because, as the Layfield Report demonstrated in 1976, the rateable values of the 18 million dwellings in England rest on the rental evidence supplied by a mere 13,700 properties, and that is a very weak base to say the least.

We all know that rateable values for similar properties vary substantially across the country. Inland Revenue figures show that the rateable value of the so-called standard house varies from £674 in Westminster to £472 in Elmbridge; £291 in Greenwich; £254 in Manchester; £165 in Barnsley and £146 in Islington. That variation, which is a factor of almost five from highest to lowest, is surely much wider than the variation in prices for comparable properties across the country. But though all rateable values are out of date and domestic rateable values are seriously flawed, rateable values underpin the whole system of local government finance and even affect the distribution of the block grant to local authorities about which I have been speaking.

So the end result is an implausibly wide range of average domestic rate bills. In 1985–86, the range of average domestic rate bills was as follows. Inner London ranges from £747 in Kensington and Chelsea to £371 in Wandsworth, with an average of £572; outer London ranges from £747 in Haringey to £353 in Bexley, with an average of £464. Now let us look at the metropolitan areas: the rate bill ranges from £511 in Newcastle, to £212 in Calderdale, with an average of £344; and in the non-metropolitan areas it ranges from £188 in Barrow-in-Furness, to £498 in Epsom and Ewell, with an average of £314.

It is difficult to believe that variations of that magnitude in average domestic rate bills can be the result solely of variations in local spending patterns, though I have to admit that increasing spending on services, say by twice the rate of inflation (which is not unusual in certain cases) can have a very significant effect. If the variations are not so much the result of local spending decisions, then in my view it is surely difficult to argue that they are fair. Not only is it worth questioning the fairness of the results of the present arrangements; it is also necessary to question the basic hypothesis that householders should be responsible for meeting the net expenditure of their local councils—that is, spending on services minus the income from grants and charge for services.

There is a good case for saying that too few people pay directly towards the cost of local services. There are 35 million adults in this country. There are 18 million households, of which only 15 million households pay rates and only 12 million households pay full rates. This is not enough. If we are to retain local government as we know it in this country, more people must have a direct stake in what their local council spend as well as in the services those councils provide; for until we reduce the amount of funding coming from central government, and until we increase the number of people paying something towards the cost of local services so that we get a wider personal and a more stable business mix of contribution, we cannot have and shall not have locally accountable local councils.

If local accountability is worth preserving—and I happen to think that it is—it is certainly with some anxiety and not a little apprehension that we reflect that in 1948–49 30 per cent. of local authority revenue expenditure was financed by those who were entitled to vote in local elections. By 1983–84 this proportion had fallen to just 12 per cent. In my opinion, this created a power vacuum into which central government intruded in order to protect local ratepayers from the damaging consequences of the more extreme political decision-making at local level, examples of which in the past few years have not been hard to seek.

I have already mentioned the effect on business and I shall not repeat it; but this decline from 31 per cent. to 12 per cent. is dramatic. Its consequences are that the voter, on average, is able to gain benefit from about £8 in local government spending for every £1 of the domestic rate bill. For every £100 spent there are 12 per cent. of people paying rates, so it is £8 benefit for every £1 of the domestic rate bill. When this signal is recognised, the motivating force to maintain and even increase high local spending is, I suggest, self evident, bearing in mind the fact that the popularity of and enthusiasm for local services is in inverse ratio to the liability to pay for them. To control this high spending without any improvement in accountability, the Government have been forced, as have certain previous governments, to impose increasing controls and to exercise reserve powers of limitation on local authorities' expenditure.

My view is that the only way of rolling back such centralising controls and getting the local government system to work is by increasing accountability. That is the solution to which this Green Paper (for the first time of all Green Papers) has addressed itself. Time does not permit me to make more than a passing reference to the Green Paper, but I am sure it will get a thorough airing from those who follow me. We may differ about the precise remedy prescribed in the Green Paper. It is a radical one; but I think that it has to be radical for the time for half measures is past. It is worthy of our most earnest consideration and support, I believe. So I say that the Green Paper should be given at least a fair wind; we shall ignore the accountability argument at our peril, if we are to expect to continue to exercise our democratic rights at local level, as I am sure we all hope we shall, in a continuing democratic society. I beg to move for Papers.

3.26 p.m.

Baroness David

My Lords, I have to confess that I was rather surprised by the choice of this Motion for the Conservative Party debate, because it seemed to be either critical of local government or critical of central government and I knew that the noble Lord, Lord Marshall, was an extremely good local government man and also, I am sure, a good Tory. It just seemed a bit odd. I have very much enjoyed listening to his responsible, fair and factual speech, and I think I could agree with him that something needs to be done to improve the financing of local government. I may not agree with all the solutions of the Green Paper, or, indeed, with all of his premises, but I think that my comments will emerge in the course of my speech and so I shall move on to what I have to say.

It seems to us on this side of the House that if there is a burden of rates it is perhaps because of the actions of the Tory Government who have been in office for the past seven years, years which have seen quite an unprecedented interference with local authorities. We read in the 1974 Conservative manifesto that rates were to be abolished, and that was repeated in the manifesto for the 1979 election. That election brought the Conservatives to power, but rates were not abolished in the course of that Parliament. One could say that it is the inaction as well as the actions of the Tories that have contributed to the burden of rates; that is, if it is conceded that rates are a burden.

By the time of the 1983 election manifesto the commitment to abolition had gone. Instead, there was a promise to legislate to curb excessive and irresponsible rate increases and to provide a general scheme for limitation of rate increases for all authorities if necessary; and, of course, there was the intention to abolish the metropolitan counties and the GLC.

Why are rates so high? It is because the Government have cut rate support grants by £17 billion since 1979–80 as part of a policy both of discouraging local expenditure and of shifting the burden of taxation away from income tax. The Financial Statement and Budget Report in March 1986, (the Red Book) shows the cost of 1p off the basic rate of income tax to be £950 million. This means that in 1986–87 the effect of RSG being cut from 61 per cent. to 46.4 per cent. is to enable the Government to have the basic rate of income tax nearly 4p lower than it might have been. It is this reduction in grant that has been the major factor in increasing rates.

The Government's stock answer to complaints about grant reductions is that they are only continuing what Peter Shore or Denis Healey started in the 1974–79 Government. I should like to refute that. Grant was at 61 per cent. at the beginning of 1974; it was at 61 per cent. in 1979. In between, it went up to 66 per cent. to pay for the December 1974 Houghton pay award to teachers. It was not the policy of Denis Healey or Peter Shore to soak the ratepayer in order to give income tax handouts. However, even with the proportion of local government expenditure being met by rates going up from a third at the peak to over a half now, the rating system has not broken down under the strain of this increase. We do not know whether it is near the limit. Maybe it is in Scotland. My noble friend Lord Carmichael will be speaking on the Scotland side of this later in the debate.

Our view is that if there is a burden it is on the shoulders of local authorities and imposed by this Government because of their excessive legislation—12 local government Bills in seven years, seven of them to do with finance. There has been uncertainty and constant changes have been made in the method of calculating and distributing the grants, making forward planning virtually impossible. Take targets and penalties! They were introduced in 1982 against all advice as a panic measure to curb public spending. The system failed to work and it took four years before Mr. Patrick Jenkin abandoned it.

Let us look, however, at the case for rates being considered a burden. It is made in the foreword to the Green Paper. I quote: The present local government finance system does not strengthen local accountability". It then lists the main sources of income. First, there are the non-domestic ratepayers comprising commerce, industry, schools and public buildings, although not, of course, agriculture; and is that fair? These pay just over half—51 per cent.—of total rates levied. There are no subsidies except 50 per cent. for charities. They have no vote but they have to be consulted. Secondly, there are domestic ratepayers; a minority of local electors. There are many who make use of services provided who are not ratepayers. They pay for services only in so far as they contribute through national taxation. Thirdly, we have central government grants to which I have already referred.

Let us examine this further and look at non-domestic ratepayers. Rates are a business expense, but they make up only 2 per cent. of costs for industry and 3 per cent. for commerce. They are allowed as an expense in calculating taxes on company profits. Rates will be a heavier expense now than in 1979 because of the much smaller proportion of grant coming from national taxation; and that is a decision of this Government. It is not the average business that is injured but the marginal business; the one that is otherwise in difficulties and for which rates are a high proportion of costs. Other costs on business, particularly the national insurance surcharge, have reduced in the period. So the burden, if any, is particularly on the business with low labour and high premises costs such as warehousing. The Green Paper notes with some truth that rates, though small and not shown to deter business, are an uncontrollable cost and vary from place to place and from year to year.

The Green Paper refers to a recent study by members of Cambridge University commissioned by the DoE. It could not prove very much. Paragraph 2.10 of the Green Paper repeats the usual view from the CBI etc., and I quote, But employers' organisations … report that their members have been influenced by rates in making decisions on employment". However, the DoE commissioned study said: the problem with a survey-based approach"— that is, asking firms what they think of rates— is that firms have a vested interest in complaining about rates whatever the level. Rates are, after all, an additional cost imposed on them … The effect of rates cannot be properly assessed by asking firms to give their views"— nor, perhaps I might add, by listening to noble Lords who speak for industry in this House. Overall, rates cannot be said to be much of a burden, and businesses, of course, receive considerable services in return. They are getting quite a good deal for their money.

The Government's argument would seem to have changed away from the absolute level to the need for stability and uniformity. For that, we would agree that there is something to be said. If the Green Paper proposals were legislated for, the general pattern would be for non-domestic ratepayers to pay less than they do now in areas with high rate poundages, which also tend to be areas of high unemployment such as the North East and Yorkshire. The converse of this would be that in areas with low rate poundages they would tend to pay more than they now do. The CIPFA guide to the Green Paper suggests that businesses in the North of England and most of London, except for Westminster or the City, would pay less and businesses in the rest of the South East and the West Midlands would pay more. There could be some grumbles as a result.

Now for the domestic ratepayer. The Motion calls for the burden to be spread in a fairer and more equitable fashion. There is a section in the Green Paper on those who vote and those who pay. I refer to paragraphs 1.36 to 1.39. The argument is that of the 35 million electors—the noble Lord, Lord Marshall, referred to this—only 18 million pay rates, and of those, 3 million receive full and 3 million partial relief, and that no link between voting and paying is a bad thing. One could say that this is a sexist approach. Most of the non-ratepayers who vote are spouses. Are they really considered as not paying rates? How do the Government think that most households run their budgets?—as a joint effort, I would hope. The whole concept of linking voting and paying is antidemocratic. Following that idea would mean that someone who receives housing benefit would have to have his vote discounted because he is not picking up the financial consequences. It has to be remembered that only about 40 per cent. of the electorate pay income tax. When will the Government apply the same logic to national elections?

I come now to the "fairer and more equitable" argument. What do the Government mean by fairer? Paragraphs 3.8 to 3.10 of the Green Paper talk of fairness in terms of paying for the use of services as one benefits from them—the beneficial principle—and paying for the services of benefit to the poorer members of the community—the redistributive principle. They carry these twin planks of fairness to the proposal for a community charge, which is called a charge so that people think they are paying for services and which is levied at a flat rate so that everyone pays the same. That is a clear negation of the redistributive principle. We cannot agree with the philosophy behind that. We believe in the concept of community and public provision and not of self interest, the market place and charging. It is a good thing, we consider, for the community to work together to provide decent public services for all who can benefit from them; and the wishes of the community are local decisions. This means that local authorities should have the right to levy taxes and not be hampered by government. I see from paragraph 5.28 of the Green Paper that the Government still intend to keep rate capping under the poll tax.

About the community charge, or poll tax as most people call it, we have grave reservations. The 1983 government White Paper accepted that it would be hard to enforce and that a register other than the electoral would be needed. However, the White Paper went on, This would make the tax expensive to run and complicated, particularly if incorporated in a rebate scheme. Without a rebate scheme a poll tax would bear harshly on people with low incomes. The Government agrees with the Environment Committee that this option should be rejected". The House of Commons Environment Committee in its July 1982 report, which was responding to the Green Paper, Alternatives to Domestic Rates came out strongly against that option, finding it regressive and very difficult to administer and enforce. How would those trying to evade it be caught—all those mobile people like students who move constantly from place to place and from address to address? The administrative problems are enormous. It would be highly expensive to collect and if there were substantial rebates, as one would hope, hardly worth collecting in a great many cases. Incidentally, local government would bear the cost of maintaining the register whereas central government now bears the cost of maintaining the rating valuation list.

Let us look at the impact of rates on groups of domestic ratepayers. Let us look first at households that are not poor, say those taking home £200 a week or more—not the very rich. From 1977–8 the graph of rates payable went ahead of the RPI so that rates are in some ways a greater burden than earlier. But this is hardly surprising given the shift from finance by national taxation to finance by rates as already described. Given that national taxes should have fallen as a result, it is not obvious that the cost of local government overall is a much greater burden than before. Even now rates are not a large percentage of net household income. They are 3.2 per cent. for those on £200 a week. Those people would pay the same percentage if there were a community charge. The rich—those on £400 to £500 a week—at present spend 2.2 per cent. on rates. With the community charge it would be 2 per cent. The rich will pay less. In theory households with more than two adults should pay more but they will be difficult to detect and it will be hard to enforce payment.

Let us now look at households that are poor. They have not felt rates a burden because they have been insulated from their effect by rate rebates and housing benefit. Those too proud to claim of course have suffered. In future, however, the current social security proposals involve all households paying at least 20 per cent. of their rates. The Green Paper assumes that the social security Bill has become an Act. It assumes it to be in operation. The Government aim to reinforce accountability at the expense of social justice.

Rates vary materially from area to area. The poor in high-rated areas will be the hardest hit. With the current rebates, those with £75 to £100 a week will pay 3.1 per cent. of their net income in tax. With the 20 per cent. minimum they will pay 3.9 per cent. If there were a community charge, with current rebates it would be 2.7 per cent. With the 20 per cent. minimum it would be 3.6 per cent. The poor will suffer. Is that fair?

The Institute of Fiscal Studies have produced this week a commentary on the Green Paper. In the chapter on the Distributional Impact on Individual Households they say: The Government's proposals for social security reform will have the effect of increasing the amount of rates to be paid by householders at the lower end of the income distribution". The same paragraph goes on to say: Taking the two charges together, the combined effect of the social security charges and the proposed changes to local government finance, will involve some larger household gains and losses than shown in the Green Paper. It goes on to criticise the presentation in the Green Paper, particularly Figure 11 on page 25, which it considers misleading in making the community charge seem less regressive than it is. It has other criticisms, concluding, To summarise the impact on households: households will, on average, gain or lose depending on which local authority areas they are in That is not all that different from now.

If the Government are determined to make fairness their aim in any reform of local government finance, it looks as if further study is needed of this community charge.

The Motion talks of spreading the burden in a fairer and more equitable fashion. But I would ask: have the Government themselves acted in an equitable fashion? Their constant changes in the grant mechansism have meant very unfair treatment to many authorities. In 1986–87 we have the swing to London from the shire counties, London gaining £200 million. As a result of these swings, rates in an area can change considerably even if the level of service is unchanged. Is that fair? This is why we see rates going up by 30 per cent. or more in "good" Tory authorities. Can the Minister tell us whether this situation is to remain the same next year with the inner cities still receiving higher grant; or, the post-aboliton elections being over, will there be a reversal of what happened this year?

Then there is the recycling of the £500 million resulting from the clawback from the overspenders. This was announced too late for many authorities to reduce their rate demand although some may have anticipated it. May I ask the Minister whether the total amount announced for recycling in the list of grant entitlements will definitely be paid? For many reasons final spending in local authorities tends to be lower than budgets. Will the Government undertake that any money needed to implement their £500 million grant recycling pledge will be provided when final spending figures are known even if no extra money, beyond the settlement, seems to be needed now? I should like to have an answer from the Minister on this point.

Then there is the £76 million that the GLC is not permitted to spend. I understand that the failure to spend produces £64 million additional grant, and this is at the expense of all authorities. It could cost other authorities a considerable sum, say half a million for a shire county. This is the kind of thing that happens with the system that the Government have invented. Are they intending to put any more money in for 1985–86 to redress the situation, I ask the Minister?

What I have been trying to illustrate is how difficult it is for local authorities to operate efficiently, and to plan ahead sensibly, when there is so much uncertainty. Local authorities need certainty. No authority can be sure how much grant it will receive. It has a legal duty to raise enough rates to finance its expenditure. No doubt rates are higher and the burden greater in 1986–87 than they would have been under conditions of greater certainty. This uncertainty is the natural result of a system devised by central government.

Kenneth Baker, at the Tory local government conference, described his own government's system of finance as "a maze, surrounded by a marsh, shrouded in a fog". Those are his words. No business could manage with its finances based on such a precarious foundation or on such out-of-date information. The noble Lord, Lord Marshall, referred to this. The last revaluation was in 1973 based on notional rent, recognised by Layfield as unsatisfactory in his report 10 year ago when he recommended capital revaluation. Adam Smith's canons of taxation were equality, certainty, convenience and economy. I do not think that this Government would get very high marks from him.

I cannot end my speech without a word on Labour Party policy on local government finance, or I am sure that I should be chided by the noble Lord, Lord Boyd-Carpenter. What I can say is that we shall not abolish the rates and we shall not introduce a poll tax. Local income tax is being considered. A policy paper is being prepared for the July meeting of the national executive committee when a final paper will be decided on to be presented to the party conference in October. I would suggest that it is perhaps better to take time to consult the local authorities rather than to invent a policy off the cuff, which seems to have been the case with the 1983 Tory manifesto promise to abolish the metropolitan counties and the GLC. We are seeing the repercussions of that now in rate rises, the anguish of the voluntary bodies left stranded, and the fears of those in the arts and theatre world. I hope that we shall come up with a policy that is fair, that does not impose undue burdens, but which will take good care of the less fortunate in society. I would be the first to admit that it is not an easy task.

3.48 p.m.

Lord Winstanley

My Lords, I must at once join with the noble Baroness, Lady David, in thanking the noble Lord, Lord Marshall of Leeds, for giving us an opportunity to discuss this immensely important topic. I say at the outset that it seems to me that this is where we all came in. I say that because I am absolutely convinced that each and every one of us has been discussing this very topic from as far back as we can remember in our political lives.

When I look at the very distinguished list of speakers—littered as it is with the names of people with distinguished records of service at various levels in local government—I find myself something of an interloper. Why me? Perhaps I may say that I am here acting as a locum tenens, a capacity in which I have acted very frequently, medically, and in other respects. However, my noble friend Lord Evans of Claughton, who is immensely experienced in these matters, has not yet recovered from the serious illness from which he has been suffering.

I have to say as well that my noble friend Lady Stedman—who, again, has vast experience in local government matters—is also not able to be here. Had they been able to be here, they would both have spoken and your Lordships would have known that this is at least one subject on which the two parties in the Alliance on these Benches are wholly in agreement, and are singing precisely the same tune.

However, let me say at once that I do not want it to be thought that I am not interested in or concerned about this subject; indeed, I am and have always been so. I have always taken the view that local politics and national politics are somewhat different and that they do not always mix. I took the view years ago that there was no more unhappy a political animal than the municipal MP—the man or woman who brought the skills, concerns and mood of the council chamber to the Floor of another place. Similarly, I was inclined to think that the person who belonged properly on the platform of national politics was not always outstandingly successful as a local councillor.

That having been said, how different it is in your Lordships' House. Were we to be deprived in our House of the services of all those noble Lords and noble Baronesses who have had a very distinguished record over the years in local government, your Lordships' House would indeed be impoverished.

I said when I began that this was where we came in. I think I can honestly say that the first political speech which I can recollect making publicly more than 50 years ago was on this very subject. I am sure that everything that I said on that occasion applies today. I believed that it was right then and I believe that it is still right now, and in so far as I can remember it, I shall say it again!

The noble Lord's Motion refers, among other things, to "the burden of rates". One accepts that any tax is a burden, however it is levied. Rates are a tax of a kind and they are therefore a burden. However, the size of the burden, irrespective of the means whereby the rates are levied, depends very much upon precisely what has to be paid for out of the rates. In other words, it depends upon what local government is required to do.

I have always taken the view that Parliament in general—both Houses—has been rather too obsessed with the structure of local government at the expense of the function. I have always taken the view that one cannot decide what is the optimum size of a unit of local administration until one is absolutely clear about precisely what it is required to do. Your Lordships will remember the Maud Commission which did such splendid work. How sorry we all are that Lord Redcliffe-Maud is no longer here with us to take part in this debate. However, I think that even that commission fell partly into the trap. It was obsessed with structure, shape and size and did not think sufficiently about function.

There is a further difficulty. The same size of unit is not necessarily ideal for different functions. It does not necessarily follow that if you establish a size of unit of local administration for dealing, for example, with primary school education, it will necessarily be the right size of unit to deal with further education and higher education. Therefore, that situation also causes problems. I am sure that there are many examples which occur to noble Lords.

Part of the present size of the burden of rates, referred to in the noble Lord's Motion, is due to the fact that some matters now undertaken by local government are matters which should be undertaken by central government. I know that for many years we have had arguments about the extent to which education should be a wholly central government responsibility. I know that matters like teachers' salaries have largely become a burden on central funds rather than purely local funds. However, it can be argued that the function of education as a whole may be better administered as a central government function rather than as a local government function. I do not want to go any further into that matter save to say that I think that part of the size of the burden is due to the fact that local government is sometimes required to do, or finds it necessary to do, things which ought more properly to be the function of central government.

I should like to refer to a very minor matter in that connection, and I do so because I know about it in some detail and also because it illustrates very clearly the point which I have in mind. I recently had the somewhat unexpected honour of becoming the deputy pro-chancellor of the University of Lancaster. In that capacity, I have learnt that a body called the Lancashire and Western Sea Fisheries Joint Committee—a body which has very close links with the University of Lancaster's department of biological sciences—is threatened with closure. I understand that it will lose nearly half of its annual income and that it will be forced to end its scientific work as a result of the changes in local government. Its funds came from the metropolitan counties of Merseyside and Greater Manchester.

Nearly all the metropolitan district councils in Greater Manchester and in Merseyside have decided not to continue to support the Lancashire and Western Sea Fisheries Joint Committee because of financial pressures. That body is responsible for some very important and interesting work such as, for example, lobster stock enhancement; monitoring coastal pollution, such as the high mercury levels to be found in Liverpool Bay—a matter raised by my noble friend Lord Tordoff at Question Time in your Lordships' House not long ago—and also monitoring pollution in that area arising from the reprocessing plant at Sellafield.

When we realise that we are talking about a body with responsibility for monitoring coastal pollution from Cardigan Bay to St. Bees Head, why on earth should it have been the financial responsibility of the metropolitan counties and now of the districts in Merseyside and Greater Manchester? To expect St. Helens in Merseyside or Stockport in Greater Manchester to pay for that kind of work is perhaps courting the kind of trouble which King Charles I encountered when he first asked the Midlands to pay for the navy. That type of matter ought properly to be the responsibility of central government.

However, that body is now threatened with closure. I have quoted it as an example because I know about it in some detail and because it may prompt other noble Lords to think of matters which are at present undertaken by local government and which therefore contribute to the burden of the rates which has been referred to by the noble Lord, Lord Marshall of Leeds, when in reality those matters should not be undertaken by those bodies at all but should be undertaken by central government.

I come to the crucial question of why we need local government at all. I shall deal with it very briefly. There are those who feel that the logical end to the present trend—the trend of increasing the limitation of the powers of local government—which has been going on in recent years is to recognise that we are a small country and not a vast country and that it ought to be possible for everything to be run by central government. My Lords, ought that to be so? Why do we need local government? We need it, first, in order to make sure that we bring decisions much closer to the people who are affected by those decisions. One of the main purposes of local government is to enable local people to have a say in local decisions which affect their lives in a way which they could not possibly do in relation to central government.

I come to the second reason why we need a system of local government. In my view, part of the strength of our British nation depends upon the diversity of our population and the major differences in our regions of population. One of the purposes of local government is to reflect that diversity in our population. It seems to me that the job of central government is to lay down the broad lines of national policy; but within those broad lines there is room for infinite regional variation, provided there are proper structures which can carry out those variations and which can reflect the views of local communities. Therefore, the second reason why we need a system of local government is in order to reflect local and regional differences in a satisfactory way in our ordinary lives.

Thirdly, we must have a system of local government because central government could not possibly be made sufficiently accountable to the people in a way which would be acceptable. It is by means of local government that there is local accountability; or at least there ought to be. The local councillor should be easily accessible and the local council and local council officials should be easily accessible. We must have that type of accountability. Therefore, we need local government. However, if we need it, there is surely no point in having it unless it has powers. It cannot have powers unless it has its own finances and the right to raise its own finances and, having raised those finances, the right to spend them as it wishes within the broad limits laid down by central government.

I am bound to say that if local government in its various layers, whatever the layers may turn out to be in the end, is not given the powers and the finance to provide services which are worth while, the danger is that we shall no longer find people of the necessary calibre to serve in local government. This is one of the new trends. With the increasing limitation of the powers of local government, irrespective of whatever political party we represent, there is increasing difficulty in finding candidates of the necessary calibre to stand for office in local government.

If we continue to diminish the powers of local government, and if we fail to restore powers by giving local government some power to raise its own finance and having raised that finance to dispose of it, we shall cease to recruit people of the calibre of those long-term servants of local government with whom we in your Lordships' House now have the pleasure of serving. We shall look in vain for people of that calibre, and in the end local government will suffer.

What is wrong with the present rating system? The noble Lord, Lord Marshall of Leeds, has pointed to many factors, and I say at once that I agree with him about nearly all of them. The first point that is wrong, and the most important, is that it is the one tax (and it is a tax) which pays no regard to people's ability to pay. In a democratic society such as ours, any tax must have regard to the ability of the person to pay.

I know that we have had a system of rate rebates. We have lots of people who do not pay at all because nobody knows who they are, or where they are, or because it is only levied on householders; but a tax must take cognisance of a person's ability to pay. I am bound to say that I regret the persistence of taxes which do not do so. Over the years since the last war successive governments, both Labour and Conservative, have pursued redistributive policies which have made a fundamental difference to our society in the way of redistributing income and, indeed, wealth.

I rather regret the extent to which in recent years those redistributive policies, operated by both Conservative and Labour governments, have been put into reverse. One of the matters that puts them into reverse is the rating system. If we do not have a local tax which has any regard to people's ability to pay, we are not following what clearly ought to be a rule.

Secondly, as the noble Lord, Lord Marshall of Leeds, said, we have a tax which is paid only by householders. Of course, it is simple. When we are talking about it being done in other ways, perhaps I may say that I was interested to read the words of Councillor Jack Layden, the chairman of the Association of Metropolitan Authorities. He asks: How will local authorities compile the registers?"— that is, registers of ordinary citizens. He says: Tens of thousands are homeless, many more are constantly on the move. He goes on: at least buildings—on which the rate system is based—stand still long enough to be counted. That is why it is levied on householders and on buildings—because they stand still long enough to be counted. But that does not make it fair, and indeed it is not fair. It forgets about land; and why not taxes on land values? This is not the occasion to launch a speech on site value rating, a matter with which I have been concerned for many years and in which I know many noble Lords are interested, but it is a matter about which we are somewhat concerned. But why not land, and why only houses?

If it is only houses, there are extraordinary anomalies. We have rates on one house occupied by an elderly widow. The house may be too big for her, but she did not want to move when her husband died. Nor did she wish to move when her children grew up and moved on. Therefore, she stayed on alone in a house which is too big for her. She pays the same amount of rates—that is one, single, elderly person—as the identical house next door which houses 12 healthy working adults. That is ludicrously anomalous and the kind of thing which must be got rid of.

My third fundamental objection to the present rating system levied solely on householders and on property is that it provides a constant discouragement to people to improve their properties at a time when it is desperately important in the national interest that properties should be improved. It is outrageous that merely by installing central heating and improving one's house, one increases one's own rate burden. It provides a disincentive which is quite contrary to the national interest.

Time is going on, and I must pose the question: what should be done? I have examined the Green Paper. I have read it from cover to cover, and I would say at once that I do not disagree with all of it. There are parts with which I agree substantially, and no doubt in due course from these Benches we shall have an opportunity to say so. We shall also have an opportunity to say in more detail what we would like to do.

Some of those things have already been said. The noble Baroness, Lady Stedman, spelt them out in October 1983 in a debate initiated in this House by the noble Lord, Lord Beloff, on a Motion similar to the one we are debating today. On the next occasion we shall certainly spell out our proposals in some detail. In part, we shall want to move to a system of grants, of specific grants for local expenditure, and introduce a system which is both simple and predictable from one year to the next: grants based on objective criteria so that local authorities can plan forward their finances. The system of those grants for specific purposes should be fair and resistant to manipulation by central government for short-term political ends.

Up to a point, that means a measure of hypothecation of the rate support grant or elements contained within it. It is a matter I raised in an earlier debate, and a matter about which the noble Lord, Lord Elton, was kind enough to write to me. It is a matter of some importance. If it is proper for Parliament to say, as it has recently said, what local government should not spend money on, bearing in mind that much of the money must come from central government, it is also proper for central government to say what local government should spend money on.

I had some experience of this when I was chairman of the Countryside Commission. There is something known as the special rate support grant which goes to those county councils which have within them national parks, and are responsible for national park administration. I had to discuss with the chairman of one county council, when I had to vet their application before it went forward to the Secretaries of State for approval, an item of X-hundred pounds for the provision of wardens which the Countryside Commission recommended.

I had to say to the then chairman, "You haven't got any wardens, and you've never had any wardens, but this figure is still there". He said, "Well, it is a block grant, and being a block grant, once we get it we are free to spend it on whatever we wish". I said, "But you are asking for it again. Are you going to have any wardens?" He said, "No, but it is a block grant". We have to think a little more about this matter of hypothecation, and I do not see that hypothecation in the sense I mean it is an unwarranted intrusion into the powers of central government.

Secondly, we undoubtedly believe that a much higher proportion of local government revenue should be raised locally, and that proportion has fallen in recent years from two-thirds in 1976 to something like one-half now. We should like to see a higher proportion. We should like to see a system of local income tax. But I am bound to say again to my noble friends on these Benches that I see the same difficulty. The areas which need most money are those which will raise least, and the areas which are able to raise the most money are the areas which need the least.

There must be some system of redistribution by means of the rate support grant from central government. I am not sure that I am wholly with the noble Lord, Lord Marshall of Leeds, who was hinting in the sense that local government should become much more self-supporting and less dependent on central government. If we are to equalise the opportunities in different parts of Britain, a nation which varies greatly from region to region, there has to be a substantial measure of redistribution in relation to local government, and that redistribution can only be brought about by a sizeable grant—an equalising grant; call it what you will—from central government to local government. I do not see that as an infringement on the powers of local government, provided its purpose is properly spelt out.

We shall leave to another occasion further debates on the proposals which will come from these Benches. In the meantime, I repeat my thanks to the noble Lord, Lord Marshall of Leeds, for introducing this subject. I shall listen with great interest to the speeches of other noble Lords and noble Baronesses who follow, but I want to say that unless we put these matters right we shall not put local government right, and we shall not make service in local government worth while. If we do that, we shall no longer get candidates of the right calibre, and that is the most certain way to destroy local government totally and effectively.

4.10 p.m.

Lord Boyd-Carpenter

My Lords, the only point on which your Lordships will unanimously agree is that we have considerable cause for gratitude to my noble friend Lord Marshall of Leeds for introducing this debate in a speech of such authority and balance. As your Lordships know, my noble friend has had a distinguished record in local government and the speech which he gave this afternoon reflected that long and tried experience. If this debate is the success I hope it will be, it will owe a great deal to my noble friend.

From one point of view this debate is undoubtedly a success; that is, the pronouncement which we heard a few moments ago from the noble Lord, Lord Winstanley, that there was one matter on which the two parties in the Alliance were in agreement, and that is the subject of rates. I had always thought it was only the desire to gerrymander the electoral system, with some continental variegated changes that united them, but now we know that there are two matters on which the Alliance is united. This is a very moving thought for many of us.

I was moved also by the intensely conservative speech of the noble Baroness, Lady David, with her gallant, long-standing defence of a 300 year-old system. I have often though that the name, "the Labour Movement", is almost the greatest misnomer in contemporary politics. On the contrary, nothing is so static, so conservative or so antagonistic to change as the Labour Party. The speech of the noble Baroness, delighfully delivered, as her speeches always are, was redolent of that inherent conservatism. She really did not want to see changes. She even doubted whether there was a rates burden. Two or three times she said, "If there is a burden". I wonder how those words will sound to the millions of our fellow countrymen who in the next week or two will receive rate demands from their local authorities for large sums of money, backed by the threats of the machinery of the law if these sums are not promptly paid. I wonder whether the noble Baroness is really interpreting what people outside feel when she expresses a doubt about the existence of a rates burden.

The noble Baroness went on to say that, if there is a rates burden, it is all the creation of the Tory Government; they ought to have increased rather than diminished the rate support grant. She indicated her distaste for remissions in direct taxation which she believed to be connected therewith. I wonder again whether those people who will find with PAYE next month that their income tax is reduced will quite share that detached view; whether, indeed, those who are in work and who work—and they are, I am glad to say, the great majority in this country—will not be glad to see that they will be able to retain a fraction more of what they have earned and a fraction less is to be deducted by the tax man.

The whole theme of the noble Baroness was that the trouble was lack of a large enough rate support grant. Not once in her speech did she even hint at the possibility that there might be overspending by local authorities. Yet your Lordships have heard again and again on the legislation going through this House of the wild extravagances perpetrated by many local authorities, including the one which for the next few days only, I am thankful to recall, will exist on the other side of the river. Simply to assume that all local authority expenditure is all right and that what is needed to prevent an excessive rate burden is to tax the general taxpayer, with moneys to be used in a way that the general taxpayer will have no control over, but simply to be spent by local authorities many of them known to be profligate, is not again, I should have thought, an idea which will be universally popular among our fellow countrymen.

The noble Baroness went on to an idealistic paragraph, all beautifully delivered, in which she said that it should be left to the local community to decide. What realism is there in that when one recalls that half that local community does not make any contribution whatever towards paying for the amenities to be provided and that the other half altogether provides no more than 10 per cent.? There are few of your Lordships who would not be attracted by the idea of nice arrangements being made for which, at the most, you had to contribute only 10 per cent. With respect to the noble Baroness, it is not good enought to reflect how nice it would be if this could be left to the community unless the community itself has to take the burden and responsibility of raising the money to pay for those services and to undertake and face the taxation involved.

Your Lordships know perfectly well that the present rating system is largely under strain because of the enormous increase in local government expenditure over recent years. It has been well said that people pay their taxation in sorrow and their rates in anger. It is undoubtedly the case that the rate burden has risen considerably. The noble Baroness tried to brush aside the burden on industry by saying "Oh well, the rate payment is allowable as a charge against taxation." For a prosperous company making large profits that is a perfectly valid, though not a particularly important, point.

The noble Baroness entirely ignores the fact that many companies are struggling with a deficit or struggling to make even the most modest profit. If a company does not make a profit the fact that the rates, which it has to pay anyhow, profit or no profit, are allowable for tax purposes is a remarkably poor consolation. Indeed, there can be cases where that 2 or 3 per cent. that she brushed aside could be decisive as to whether a company can continue.

The noble Baroness also ignored the impact of the rate burden on the areas about which we are all concerned in this House; the areas of unemployment, particularly in the North, the North-East and the North-West. The knowledge both that rate payments will be high and that the atmosphere locally will be anti-entrepreneurial is the biggest possible discouragement to industrialists in setting up new enterprises in precisely those areas where we all want to see them set up; that is, the areas of high unemployment.

It is no accident that new industries are sprouting up and flourishing in what is sometimes rather easily called the M4 valley; in areas where rate burdens are low and where the local authorities, trade unions and trades council are friendly to new enterprise and to business enterprise. It is equally pretty clear that few industrialists with any regard for the well-being of their shareholders would feel disposed to put a new enterprise and new investment into those very cities where we want to see it go. What sensible industrialist at the moment could contemplate setting up a new enterprise in Liverpool, where he knows that local government is in chaos and that the rate burden will be severe? If we are to talk about faith in the cities, the sort of faith in the cities we want is the faith of an industrialist who feels confident that he can set up his enterprise there and give that much needed employment. Your Lordships cannot discuss this issue of rates without realising the increasingly harmful effect of the rate burden on those areas of unemployment.

The whole system is geared to extravagance. If you have a system under which 60 per cent. of the rates are contributed by the disfranchised—that is, by industry, commerce and business, which have no vote—and where among the rest half the people are not paying at all, you have a system which is almost ideally geared to extravagance. Referring to human nature—and I come back to the noble Baroness's delightful concept of the community—naturally, if you have a system where you can vote for benefits which are either going to cost you nothing or which you are going to get 90 per cent. free, that is a system which is designed to attract support for irresponsible expenditures.

That is not academic theory. We have seen this happening in all the cities where the hard Left have been in control, where they have seen fit to go far beyond the normal duties of local government and have sought to indulge in essays in foreign affairs. Your Lordships have only to look across the bridge to see a great notice which says: "You are entering a nuclear-free zone"—a notice put up at the cost of the ratepayers by people who know that it is an utterly meaningless formula designed simply to exploit the natural fears and anxieties of their fellow citizens.

You have these authorities in London, who have set up great police committees, although they have no police responsibilities or powers whatsoever. You have examples—I could quote so many—of those who have used the machine of local government for the forwarding of their party political aims, such as Councillor Knight of Lambeth, who openly said that he will use the council's vehicles to support the Labour Party. He proposes to go on doing it because his one determination is to get the present Government out. You have all this spending, not on the welfare services, to which the noble Baroness is deeply attached—so am I and, indeed, so are most of your Lordships—and which are one of the major functions of local government, but all the use of the rate-collecting power in order to support national political views.

There is another aspect, apart from the gearing towards expenditure, which has not been touched upon in this debate; that is, the system of precepting. Under our present system an authority can, as up to the last few days the GLC could, raise funds, not even by themselves imposing a rate on the ratepayer and accepting open responsibility for it, but by simply precepting the rate-collecting authority and having their dirty work done for them. The precepting system, I think, is a particularly unfortunate aspect of our present rating system because, again, it is an incentive to irresponsibility, it is an incentive to expenditure and it makes it only too painfully easy to obtain money for what you regard as good purposes without actually having to face people with that demand.

If I may sum it up, I think this is the real substance of the weakness today of our rating system. Your Lordships know, and indeed I have often quoted in this House, some very fine words from the last speech in the House of Commons of the late Mr. Aneurin Bevan that the problem for all democracies today is so to restrain the public appetite for expenditure as to enable economic growth to take place, not to take away in taxation for present consumption the money needed for investment and development in the future. Your Lordships know that is the problem which faces all democracies, including our own; and in our system of central government at least there is some knowledge among those who vote that if they vote they will have to pay for the expensive policies for which they have voted.

The noble Baroness tried to avoid this by saying that only 40 per cent. of the electorate paid income tax. Every member of the electorate pays some tax, even if it be on a glass of beer or on cigarettes, if a person is foolish enough to smoke them; but, whatever it is, every member of the public pays national taxation. That is unavoidable, and that is known by our voters. But when you have in local government a system such as I have already described, where most of the weight locally is paid only by a minority and where either central government funds or the rates on business carry the main burden, you have a system almost ideally designed to force up expenditures. It is because of that, I think, that the rating system is now in some considerable degree discredited.

The noble Lord, Lord Winstanley, said rightly that we in this country have been talking about this for years. I have a nostalgic memory of going, as Chief Secretary to the Treasury, to the Conservative Party Conference in Blackpool in 1963 to announce our proposals for reforms of the rating system. Some of your Lordships may recall that my great and carefully prepared pronouncement on that subject was completely overshadowed by the arrival at Blackpool of my noble friend, then the Earl of Home, with the announcement about his right honourable friend's resignation: that is, the resignation of my noble friend Lord Stockton. Consequently, those well-thought-out words prepared in the Treasury received rather less attention than they might otherwise have done. Even The Times, which on the whole is rather kind to me, said that 20 minutes of the Chief Secretary had never seemed so long.

I quote that personal, somewhat nostalgic anecdote in order to show that at least it cannot be said that the Government have rushed into this matter. There has been no undue haste and even the Green Paper is a consultative document on which, as I understand it, the Government wish to have the views of all concerned, of local authorities and of your Lordships. I hope that public opinion generally, when it is considering this matter, will be more disposed to accept the more enterprising and open-minded approach of the noble Lord, Lord Winstanley, than to accept the stolid conservatism of the noble Baroness, Lady David.

4.27 p.m.

Lord Dean of Beswick

My Lords, perhaps I may first add my tribute to the noble Lord, Lord Marshall of Leeds. We have been in some respects long-standing political opponents, but across the political divide we have established a form of friendship and have discussed similar problems, although sometimes we may have wanted to find different answers. The weaknesses I find in his approach, and certainly in the analysis and the proposals suggested by the noble Lord, Lord Boyd-Carpenter, are absolutely beyond belief. Are the noble Lords aware of the size of the problem in some of the areas of the country today? There is no system that this Government or a future Labour Government could devise that could be applied universally, because some areas would find it totally impossible to raise increased finance by any means. I shall try to illustrate that in the time left to me.

I am pleased to be able to say that I think the figures produced by the noble Lord, Lord Marshall, will certainly help us in future debates about the analysis of how the present rates are structured and collected. However, I wish to talk about the city of Manchester, where for quite a while I was privileged to be involved in local government and to be its leader, and about the changes that have taken place in that great city since the war. In doing so, I think I can illustrate why the approach suggested by the noble Lord, Lord Boyd-Carpenter, would only further exacerbate the difference between the areas of deprivation and the areas of affluence.

In my opinion, if that approach were made to financing local government, the areas of deprivation would increase at the more alarming rate that they are at present. I take my title from an area called Beswick. Beswick was a traditional, stable, working-class area of Manchester. I am going to talk about Beswick and about another area of Manchester that has a national name for deprivation, the area of Moss Side. The two areas were originally dissimilar although they were both working-class. Beswick and Moss Side, until slum clearance started, were the two most densely-populated areas in Europe. Manchester itself at the end of the war had a population of three quarters of a million people. Through some slum clearance and people moving out, its population is now about 450,000.

It is not a balanced community and neither are most of the other big cities. What they have now is an ageing population that increases year by year, and a diminishing number of young people on whom the burden would fall to find the finance that we are talking about. In my opinion, we would be chasing the wrong horse if we thought there was a uniform system that could be put into operation to deal with this situation. I am glad that the noble Lord, Lord Winstanley, has referred to it.

Let me say that Manchester is a city with acute and growing problems of unemployment, poverty and deprivation and a legacy of industrial infrastructure unsuited to the needs of the latter half of this century. "The problem of the inner city" is not just a political catchphrase but a reality which has to be faced by the local council, the government departments and the agencies working in these areas in trying to deal with the situation. I suggest that the case which I am about to make represents a comprehensive rejection of the present approach that the Government have adopted towards inner cities in Manchester and in the other major conurbations.

Successive governments have recognised the magnitude of these problems and have sought to direct resources in a way that tackled many of these problems directly. The previous Labour Government established a system of partnerships which placed due emphasis on the need for a genuine co-operative partnership between national and local government, industry and commerce and the residents of the inner city to develop a comprehensive strategy to tackle the deep-rooted problems of the inner city. The city council in Manchester and its various communities at that time welcomed that initiative and entered into it wholeheartedly. Additional financial resources were made available; but, more importantly, there was an explicit recognition that the budgets of other government departments and the city council's own mainstream expenditure were essential elements of any strategy to arrest the decline in the deprived areas.

I have to say that if anybody thinks that the problems in the centre of cities like Manchester and London can be dealt with without increased government financial support they are living in cloud-cuckoo-land. They will not be dealt with. The policy of partnership has been maintained by the present Government. They have retained the apparatus and the system of annual financial allocation; but in most cases it is a paper commitment only, because while providing the resources with one hand, they have been systematically removing them with the other. The mainstream budget of Manchester City Council, financed through the rate support grant, has been massively cut since 1979 in a manner that shows what this Government really feel about the poor and deprived communities in such areas. To add insult to injury, the Government have come forward with a variety of other administrative mechanisms to display their concern. We have seen city action teams and, more recently, new task forces to support existing agencies in providing help in training, urban regeneration and industrial assistance.

All this would be very welcome, but one has to appreciate that, since 1979, Manchester has lost £400 million of rate support grant and housing subsidy under the present Government. That is a colossal sum. Restoration of that money to Manchester and to the other cities such as Leeds, Liverpool, Sheffield and the inner London boroughs is a matter of urgency. Successive reports by various non-political bodies—and one, Faith in the City, has been referred to today, one which I think we shall debate shortly—support that point of view. In 1978, in Manchester, the city's unemployment rate was just over 10 per cent. When I referred to Beswick I said that it used to be a very heavily industrialised area with quite high levels of employment, with very little unemployment, and even that only in the very early 1930s during the severe recession. In 1978, the city's unemployment rate was just over 10 per cent. It now stands at 23.8 per cent., which is approaching 1 in 4 of the city's residential workforce. About half of the city's unemployed have been without a job for a year or more and nearly 1 in 5 for over three years. How do you collect money off people that are in that situation?

That rate is monstrously high but it conceals large areas where the rate is significantly above the city average. That is why I have chosen Beswick and Moss Side. In the central area of the city, which covers the city centre, Miles Platting, Beswick, Ardwick, Moss Side and Hulme, the overall rate is 34.4 per cent. It is a rate of nearly 43 per cent. unemployment for men in those particular areas. In Hulme, male unemployment is 61.2 per cent.—nearly two out of three men, therefore, having no jobs. I know that Members in other place, Mr. Litherland and Mr. Tony Lloyd, particularly, perpetually raise this situation, but so far without success.

Let me take the example of East Manchester which covers the Beswick area that I am talking about. It is an area that for almost 200 years was a hive of industrial activity. Light and heavy engineering industries, coal mining, chemical firms and textile businesses all thrived in the area. It was known as the "workshop of the world" and was a major reason for the growth and development of Manchester in the 19th century. The decline of industries in the area started in the late 1960s when a number of major employers closed their works. Nevertheless, in 1971, the area still supported 34,000 jobs. Major closures continued during the early 1970s but in 1978 manufacturing employment still accounted for 63 per cent. of all jobs in the area compared to the city average of 26 per cent. so it still retained its identity as a manufacturing base.

Since that date, as the national recession has deepened, job loss in manufacturing industry in East Manchester has become more dramatic. Between 1979 and 1983, 12 firms employing more than 100 people closed down altogether. Between 1971 and 1985, 20,000 jobs have been lost to Manchester, which is 60 per cent. of the 1971 total. The redundancies between 1981 and 1984 account for 4,500 of these jobs. Until 1980, unemployment in this area of the city was about level with the national average and well below the city average. The unemployment rate now in the Beswick city job area stands at approximately 25 per cent. What a disastrous state of affairs for an area which only a decade ago was almost a thriving community! I have to say that the reason for that has not been high wages. It has never been a high-wage area and it has an excellent record of industrial relations. Those particular charges cannot be levelled at the people in that area.

Your Lordships are used to hearing masses of statistics. They tell the all-too familiar story and they have been repeated here and in another place. Nonetheless, they are dramatic. It is easy to underestimate the significance of such a transformation when it occurs within the wider context of urgent urban and regional decline. Such job losses equal the population of a large town, and in fact is comparable, in relative terms, to the scale of job loss in East Glasgow which led in the late 1970s to the setting up of the GEAR project. The cumulative effect of those job losses is also comparable to a community the size of Corby or Consett becoming totally unemployed. That is the size of the problem with which we are dealing.

The rise in unemployment in recent years in East Manchester, from the national average in 1980 to twice the national average in 1985 has been as steep and dramatic as anywhere, and the deterioration continues. That is the type of situation with which we are dealing.

The problems go far beyond Manchester. The extent of poverty in the city is that at the end of the 1970s about 15 per cent. of the city's population was dependent upon supplementary benefit. By 1984, that figure has risen to 31 per cent. That is despite the fact that there is a percentage of people who are unaware that they can claim and do not claim. Allowing for that, probably in the region of half the city's population is now living on incomes which are at about—and, in some cases, below—supplementary benefit level.

Although the supplementary benefit level can be regarded as the Government's "poverty line", most recent studies have taken 140 per cent. of supplementary benefit level as a more realistic poverty standard. No local information is available about incomes, but over 43,000 residents who, together with their dependants make up about 15 per cent. of the city's population, receive standard housing benefit and are therefore not getting supplementary benefit. In addition, the number of single parent families on supplementary benefit has increased by over half since 1979. The number of sick and disabled people receiving supplementary benefit increased by one-quarter over the same period, and between 1978 and 1985, the proportion of schoolchildren receiving free meals rose from 35 per cent. to 47 per cent.

On health, the situation in Manchester is deteriorating. Some of the statistics are frightening. A recent report prepared by Manchester's three health authorities in co-operation with the city council's planning department has revealed some disturbing facts about the state of people's health in Manchester. The report probes the link between poor health and social environment and it shows that areas with high levels of social deprivation (including unemployment) have concentrations of ill health. For example, areas with high unemployment levels will also tend to have high incidences of coronary heart disease and lung cancer. Those differences mean that, on average, Mancunians are more likely to die prematurely than their fellow countrymen. Some examples of the scale of the problem are that between 1981 and 1983 over 5,000 Mancunians died before reaching the age of 65 years. That was almost 1,400 or 37 per cent., more than should have done had national trends applied. In parts of Manchester death rates due to respiratory diseases and lung cancer were over twice the national rate, while coronory heart disease accounted for amost 80 extra deaths per annum. That is the type of situations that some people think can be dealt with by using a broad brush on a very broad canvas.

I think that today's debate, opened by the noble Lord, Lord Marshall, has been extremely worthwhile. This is only the start of the debate. I am frightened by what may happen in areas such as the ones that I have described. They are not the only cities. Leeds has a similar problem but to a smaller extent because geographically it is about seven times larger than Manchester although Manchester also has a bigger population.

Whatever rates system the Government bring in, whether it is some form of local tax, poll tax, tax on employment, property tax or whatever they bring in, unless they are prepared to help areas with severe and sad conditions which are deteriorating rapidly, the inner city problems about which we have been talking will not go away. If they are left to their own devices, they will become worse. It is no use the Government saying to people that they live within a ring fence and that they will get only so much from the Government and must raise the rest themselves because, on the figures that I have quoted, the inner city problems that we have been talking about will continue to grow unless the Government restore the level of funding that existed when they took office.

As I said, the debate is extremely worthwhile. I want once again to express my appreciation to the noble Lord, Lord Marshall of Leeds, for the constructive and reasonable way in which he introduced the Motion.

4.45 p.m.

Baroness Faithfull

My Lords, local authorities carry the heavy burden of the provision of efficient local services to their communities while at the same time having to husband their resources so that they do not cripple either local residents or industrial and commercial enterprises. I hope that I will be forgiven by your Lordships for narrowing the debate and commenting on local authority housing departments when considering a fairer and more equitable way of spreading the burden of rates. I am grateful to the noble Lord, Lord Marshall, for providing this opportunity.

I seek to concentrate on grass-roots accountability and responsibility. My first point will be about rent and rate arrears. Sadly, throughout the country there are thousands of people who do not pay their rates and rent. From the point of view of common humanity and a sense of responsibility, those who have a council house—a home of their own—and who do not pay their rent and rates are surely penalising those who have no house and thus no home. From your Lordships' House, I presume to appeal to all those in this country owing rent and rates to remember that they live at the expense of those who are homeless.

Officers of housing departments are reluctant to evict people, and rightly so. They have only one sanction, which is the attachment of earnings order procedure. But the courts are so crowded that by the time a case of non-payment of rates or rent is taken to court, several months have elapsed and the debt has grown. It has often risen to unmanageable proportions. May I ask my noble friend the Minister whether special courts are being set up to deal immediately and expeditiously with rate and rent arrears? That may be a duty which later will be assigned to family courts, but they are a long way off.

Another point that I want to make is a democratic one. The noble Lord, Lord Boyd-Carpenter, said that people know when they are paying taxes. They know that when they drink a glass of beer or have a package of cigarettes they are paying taxes. Many council tenants do not know what their rates are and I believe, from an absolutely democratic point of view, that in the demands from the local authority they should be told what are the rates as distinct from the rent. They will then know whether their rates are going down each year or whether they are going up each year, and they will be in a position to gauge whether or not they are receiving a good service.

Lord Graham of Edmonton

My Lords, will the noble Baroness give way? Surely the noble Baroness is aware that every year when there are changes in the rent and rates, each council tenant is advised of those changes. In other words, at least once a year the tenant is made aware of how much of the global sum is related to rent and rates.

Baroness Faithfull

My Lords, I am grateful to the noble Lord for his intervention. My point is that a number of council tenants in some areas do not know what their rates are, because the rates and the rent are paid together. However, I will certainly look into the matter. I am sure that the noble Lord is very well aware of the situation, but perhaps it varies between different parts of the country.

I now pass on to another point. Under various rating and local government Acts, local authorities can collect what are called void rates; that is, rates on empty properties. In the case of many local authorities, this is not done. Properties stand empty and deteriorate and they are very often kept empty for some reason or another. I know of a particular house that has stood empty for four years, because an aunt wants to leave it to her nephew. She is a fit and healthy 50 and the nephew, who is abroad, is 30. So in the natural course of events, that house will stand empty for another 30 years and I understand that no rates are being collected on it. There are some local authorities which use the void rates, but there are others which do not, and I press local authorities to look very carefully at the management of their empty properties.

I would also say, from the point of view of local authority properties, that when I was working and suffering very severely, as many of us have, in dealing with homeless families, I took out my car one Sunday and made a list of all the empty council properties. There was very good reason why they were empty. It was because they were scheduled for redevelopment, for reorganisation of the roads or something like that. I came to London and decided to walk round Brixton. I found three streets with substantial little Victorian houses that had been empty for four years and were due for redevelopment. Therefore, they were not bringing in rates and were deteriorating.

Furthermore, local authorities are paying out high costs for bed and breakfast accommodation for homeless families. I suggest that it is far better to hand over temporarily empty properties to housing associations so that they can, and will, put them in some kind of order—I admit that they would not be in 100 per cent. luxurious order—for homeless families, who would far rather live in a second-rate house than in bed and breakfast accommodation. Also, that would bring in the rates.

I now pass on to the question of accountability and responsibility. I have made inquiries and I know that to formulate tenants' associations and to have them run well is a difficult job. But if we are to change the outlook towards debts and personal responsibility in arrears of rent and rates, we have to set up and encourage local tenants' associations and give responsibility to those associations for creating the right attitude of mind towards paying one's rent and rates.

Many tenants have told me that it is very difficult for them to get to their local authority housing offices. I hope that local authority housing departments will once a week set up a local office in a church hall or in a caravan, so that tenants can talk to their local housing staff and discuss with them the problems of their rates arrears. I have talked only very sketchily about rates and rent arrears of local authorities, but I am sure that they can, and should, inculcate into the people of their area a sense of belonging and of responsibility. In this way, rent and rates would be paid and would be more equitably spread, and local people would feel themselves responsible for the vulnerable in their society.

4.56 p.m.

Lord Wilson of Langside

My Lords, by way of preface to his admirable and much admired presentation of the review of the Motion that is before the House, the noble Lord, Lord Marshall of Leeds, paid a flattering tribute to those who had put down their names to speak in this debate. I must claim to be exempt from these flattering reflections, because it may surprise your Lordships to know that in the situation in which I find myself at this moment I am reminded of nothing so much as the strength and influence of the sergeant-major. Your Lordships will remember how he used to call for volunteers in terms which implied that you were bound to respond and there was trouble if you did not, and that was it.

It befell that a distinguished member of the Social Democratic Party in your Lordships' House, a man of wide practical experience in local government and a man of vast financial experience, who should have been here today, was unable to be present and I was the volunteer. My plea to your Lordships is simply that I shall have your understanding that that is the position from which I address you in this matter. I gather that the noble Lord, Lord Winstanley, referred to himself as a locum, but I must say that he struck me as a mightily effective locum in the extremely able and effective speech which he presented and which I feel I could not possibly match.

We have had a tremendously useful, enlightening and instructive debate and I was interested in the circumstance that the noble Baroness, Lady Faithfull, referred to the problem of unpaid rent and rates. At one time, it was my unhappy duty to preside in a court that had to deal with those matters. It is a perennial hard-core social problem. It is one that we must keep working at and hope that, year by year, we may find a solution to it. I do not believe that the solution will ever be found in the courts, although the courts in the way in which they handle those matters may have an influence for good or bad.

Perhaps the happiest moment for me in this debate was when the noble Lord, Lord Boyd-Carpenter, made some caustic observations about unity in the Alliance: he suggested that it was stretched. I am always a little surprised when a man of such tremendous ability and powerful advocacy should resort to so trivial a gibe as the unity of noble Lords on these Benches. It greatly encourages me because it convinces me that noble Lords opposite are a wee bit worried. The noble Lord, Lord Boyd-Carpenter, laughs; I knew that he would. But noble Lords opposite are worried.

However, the problem we are considering today was not just the creation of the Tory Government, as the noble Baroness, Lady David, appeared at one stage to suggest, in saying that it had all happened since 1979. The activities of the present Government in the sphere of local government have been calamitous. That has been obvious to us all, particularly in Scotland, where I come from. There is no doubt about that. But the problem did not start then.

The problem started way back. Throughout my life, and long before it, this country has suffered from incompetent government, albeit not continuously. The rates problem is a consequence that flows from incompetent government; not from the incompetence of one government, or from one government since 1979, but from incompetence over the years. The situation became acute after 1979, but whichever government of the Conservative or Labour parties had been in power, the problem would still have become more acute because that is in the nature of such problems.

If governments are incompetent and do not keep events under control as much as they can (although many events in life are outside their control), then those matters that lie within their responsibilility are neglected. They will get worse and worse. That is what has happened so far as rates are concerned; that is why we have the burden of rates, the proof of which has been established, I should have thought, in this debate. There is no doubt that rates are a burden.

The fact that there is a need to consider a more equitable and fair distribution of the rates burden is a consequence of the failure over the years of politicians of either the Labour or Conservative parties to apply their minds sufficiently totally. They appoint committees and then go away and forget about the problem. By the time the committee has reported, the situation is worse. By the time the report of the committee is implemented, the likelihood is that a new set of problems has emerged in the context of rates or whatever the matter may be; and so it goes on.

That is the kind of situation that the Alliance exists to meet. Whether we shall be able to meet it, and whether we shall achieve a success that the other two parties have not, we cannot tell. I make no easy claims, but for the noble Lord, Lord Boyd-Carpenter, to be caustic at the expense of the Alliance is going a little too far.

Lord Boyd-Carpenter

My Lords, if the noble and learned Lord will allow me to intervene, all that I did, as he may recall, was to quote with great approval the statement made by his noble friend Lord Winstanley that this was the one matter on which the Alliance and the Liberal Party were united. If I cannot quote the noble and learned Lord's Front Bench spokesman without being told that I am being caustic, it will be rather difficult.

Lord Wilson of Langside

My Lords, the noble Lord will have his fun—

Lord Winstanley

My Lords, perhaps my noble and learned friend will permit me to intervene also at this stage. I did not use the words "only one matter"; I said "one matter", which is different.

Lord Wilson of Langside

My Lords, after all, we have had a thorough and exhaustive review of the matters that are directly relevant to the Motion of the noble Lord, Lord Marshall. I do not wish to go over the ground again. Many of the subjects on which I had intended to speak have already been covered and it only becomes a great bore if every speaker says the same thing. However, I do not see why I should not take advantage of this point. I do not want to discourage people such as the noble Lord, Lord Boyd-Carpenter, from having a go at the Alliance; it keeps us all on our toes, and we can enjoy it.

It is relevant for both the noble Lord, Lord Boyd-Carpenter, and for myself to observe that the Alliance was not just born because of a twinkle in the eyes of Mr. Roy Jenkins and Mr. David Steel. It was born, as I saw it, as a response to the awareness of the people that there had been terrible incompetence in government in recent years. The Alliance was a response to that. If we do not meet it when we come to be in a position where we can influence the Government or form a government, we shall be guilty of having betrayed the awareness of the people. That is what we are after, and in the context of this problem of rates we see the need for a new approach and for something to be done.

5.7 p.m.

Lord Ellenborough

My Lords, I too am much indebted to my noble friend Lord Marshall of Leeds for initiating this important debate. I am sure that both ratepayers and ratepayers' associations up and down the country will be equally grateful for his most impressive speech. It was what one would expect from him after such a distinguished career in local government.

The Government are to be congratulated on realising, if somewhat belatedly, that many of the troubles that have bedevilled local government in recent years have arisen from the prolonged and protracted delay in tackling the basic problem at its roots and from failing to sweep away the much discredited system of rates and reform the financing of local government.

Much time and effort have been spent on such measures as rate capping, the abolition of the GLC and the metropolitan authorities and, more recently, the somewhat ill-fated Bill that has just left your Lordships' House, designed to restrain blatant misspending of ratepayers' money for political propaganda. However it is possible that some of those measures would have been unnecessary if earlier action had been taken whereby all who could make a contribution towards the cost of local government should do so. Her Majesty's Government have at last appeared to recognise that, until such time as there is a closer relationship between those who pay the bills and those who vote, there will always be an incentive for some local authorities to act in an irresponsible manner.

I congratulate the Government on their excellently presented Green Paper covering so wide a field. I only hope that something will be done—more importantly, that the right thing will be done—before the ratepayer becomes virtually an endangered species, as seems to be the case at any rate in some inner-city areas.

I could not help noticing that Mr. Livingstone has recently received a begging letter from a lady in Harpenden who describes herself as a founder member of the Reluctant Exiles from Islington Association. In the letter, the good lady says that she was forced out of the Left-controlled borough by astronomic rates of £1,178.18p a year on a two-bedroom flat. She goes on to say: I understand you have a lot of money you are having trouble finding a home for (a lot of which has been donated by me over the years) and I wondered whether you would consider making me an ex-gratia payment". That the good lady is clearly in earnest can be seen by her post-script in which she says: I might be prepared to become a Lesbian if this would help". Perhaps I may be allowed that slightly frivolous digression.

I propose to concentrate on the proposals in the Green Paper on domestic rates. I certainly support the proposals on non-domestic rates in principle. I agree that the proposed new central government grant based on assessed local needs has its attractions; though it rests on the somewhat doubtful assumption that it will be possible to devise a simple formula which can be applied uniformly to all local authorities.

I regret that Her Majesty's Government at this stage appear to so strongly favour the proposed community charge as against a local income tax, which I should have thought would be the fairest and most equitable way of spreading the burden currently borne by domestic ratepayers. It may be that Her Majesty's Government are possibly misjudging public opinion. The indications that I have received from ratepayers' associations in the country is that supporters of the Conservative Party, and other parties, in such associations are decidedly coming down in favour of local income tax as against a community charge. My noble friend the Minister may be aware that there appear to be an increasing number of Conservative Members in another place who favour such a system of local income tax as being the fairest and the most practical way of tackling the problem.

The Government have set themselves various criteria by which to judge the suitability of any new method of local taxation: first; is it technically adequate; secondly: is it fair; thirdly: does it encourage local democratic accountability? I suggest that there should perhaps be added one other important test: will it really work in the wicked world as it is? In other words, will it be able to cope with all the uncertainties, complications and opposition arising from the very different kinds of potential taxpayers and the very different conditions existing in various parts of the country?

First, I shall deal with the proposed community charge and whether it is technically adequate. If this means: could it raise the approximate 11 per cent. of total local authority income which overall throughout the country is currently raised from domestic ratepayers, if it were eventually introduced in spite of all the difficulties to which I will refer? I suppose the answer must be, yes. As to whether it is fair, I do not find it very difficult to see how any standard annual charge fixed by each local authority for its own area and payable by each adult irrespective of his or her income can be perceived as fair.

According to the Green Paper, it will fall most heavily on the young sections of the community—mainly the 18 to 24 year-olds. It is difficult to see how it could possibly be fair for a 24 year-old just married and earning say, £8,000 per anum, to pay exactly the same as someone aged 48 earning £40,000. Certainly many people in their twenties should be able to afford to pay a contribution towards the cost of local government—perhaps the equivalent of the cost of a television or car licence: £100 or more. This will be all very well if, when the community charge comes in, it is only £50 or £100, but from my understanding of the Green Paper, at the end of the transitional period the community charge will almost certainly be a greater amount than that—perhaps £500; but we do not know.

Moreover, this tax is intended to be paid by students, old-age pensioners, the unemployed and other low income groups including single-parent families. Consequently, the Government accept that rebates will have to be paid—in some cases, up to 80 per cent. On the other hand, those who could easily, by reason of their larger incomes, pay a somewhat higher level of community charge will not have to pay more than the local standard charge. Thus, the same level of local charge in a given area could easily result in an existing domestic ratepayer in a large house and with a high income paying considerably less than he does now because the local authority obviously could not set the standard charge at such a high level that over half of the potential payers would be entitled to claim rebates.

Thirdly there is the question; does it encourage local accountability? Any tax which is payable by all local government electors instead of those who happen to be domestic ratepayers, as now, will certainly lead to elected councillors being much more sensitive to local reactions to their policies. That is what is wanted, and that is good. But that accountability must diminish to the extent to which in any area the lower-paid sections of the community are able to obtain rebates. Again, those residents who now pay fairly large sums in high rates, because they live in bigger and more expensive homes which represent a significant percentage of their respective incomes, may well take less rather than more interest in a local authority's proposed increases in spending in those cases where the impact on their own pockets of such increases is less than under the present system of domestic rates. Therefore, I suggest that we should not assume that, on balance, there will necessarily be a greater overall measure of real accountability.

It is estimated in the Green Paper that around 57 per cent. of the electorate would pay under a system of local income tax. That is a very big step forward compared with the 34 per cent. now paying rates. But I should be surprised—in fact, I should be astonished—if there were not (when the time comes, if it does come) pretty substantial exemptions from the payment of a community charge. With a very large number of partial rebates—up to 80 per cent. of the charge—there will probably be very little in it at the end of the day as regards accountability and numbers effectively paying either a community or local income tax.

There is, then, the additional practical test not mentioned in the Green Paper: would a community charge really work in the world as it is today? There are several practical points to bear in mind which I should briefly like to mention. The arrangements for granting rebates to the lower income groups will inevitably be much more complicated than under the existing rate rebate system, for they will have to include a large number of old-age pensioners currently not paying any domestic rates. There will also be students on grants who will be assessed in the areas where they reside during term time, despite the fact that presumably they will normally be registered for the local authority vote at their home address. This seems to make something of a nonsense of local accountability.

Each local authority will have to set up its own register of community charge payers and keep it up to date. As a substantial proportion of the present non-ratepayers who will have to pay the community charge will come from that section of the community which is highly mobile (that is to say, those who change their addresses frequently) there will be many amendments to this list and I should think that much time will be spent in chasing non-payers for what in many cases will be trivial amounts of arrears. Inevitably local authorities will have to increase their staffs in order to carry out this work.

For those reasons, the percentage of community charge income which will have to be written off by a local authority as irrecoverable is bound to be much higher than the percentage of rates income written off under the existing system. In turn, this will necessitate the setting of a higher level of community charge to be paid by those who pay in order to allow for this. During the long period of transition from the existing rate system to the community charge system which is proposed in the Green Paper—a period of several years—all these problems and difficulties will be increased. The cost of collecting arrears of community charge when the level of community charge is low (that is to say, when the existing system of rates runs, as it were, parallel with the new system, as proposed in the Green Paper) will be even more disproportionate to the net return.

All this convinces me, and my view is reinforced by what I hear from members of various ratepayer groups, that the only fair, equitable and practicable way to spread the burden of local taxation and to ensure a real measure of accountability is a system of local income tax. Under such a system all local residents who are in receipt of a taxable income at national level, irrespective of age, would be called upon to pay a local charge based on their income; in other words, the burden would be related to each person's ability to pay, as it is now in the case of national income tax.

If income tax is considered to be a fair and practicable means of taxation at national level, why should not local income tax be similarly considered at local level? As regards its practicability and cost-effectiveness, there would not be any need for local authorities to establish and maintain their own separate registers of community charge payers with all the attendant complications, because the existing Inland Revenue records of income tax payers throughout the country could be used, especially when PAYE and other income tax arrangements will have been completely computerised in the early 1990s. I do not think that there is any possibility of legislation coming in before then. Moreover, the use of national income tax records, which would include only those persons who are in receipt of taxable incomes, will eliminate the costs incurred by local authorities in processing thousands of claims for community charge rebates from old-age pensioners and students and in trying subsequently to collect a large number of very small sums of money from them.

One matter which greatly concerns me as a Conservative is that one of the main objections to any local income tax is that such a tax would run counter to the Government's commitment to reducing tax on incomes. Yet surely a local income tax would be quite separate from a national income tax. If the Government succeed in reducing the standard rate of tax to 25 per cent. by the next election, they will most deservedly get much credit.

I cannot emphasise strongly enough that any form of payment toward the cost of local government, whether it be in the form of rates, as now, a community or resident's charge, as proposed, some form of local income or services tax, or whatever—and it is a tax demand which whether we like it or not, must be paid because there is no choice about it—will have to be paid from net income.

In conclusion, I should like just to say that the present rating system is unpopular and unfair. A community charge may be even more unpopular and it will be unfair; local income tax will be unpopular but at least it will be fair.

5.25 p.m.

Lord Carmichael of Kelvingrove

My Lords, I, too, should like to thank the noble Lord, Lord Marshall, for giving us the opportunity to debate this subject today. It will come as no surprise that few noble Lords on this side of the House agree with many of his conclusions, but I think that the more discussion that takes place and the more light that can be shed on the different proposals and problems involved in local rating and the payment for local services, the better it is for everyone. It is not an easy subject. It is an extremely complicated subject, as I think we have discovered today, if we did not know it before, from all the points of view that have been put forward so far.

I want to speak only about the Scottish position and I intend to speak with some brevity. The reason I speak about the Scottish position is that in Scotland we are at a stage of being able to put forward a view of the very near future, because what is happening in Scotland is something which will be taking place later in England and Wales. Your Lordships will know that Scotland will be the guinea-pig for the propositions put forward in the Government's Green Paper which, despite the protestations of Scottish Ministers, is a horribly cobbled-up job. It is overlaid with fine statistics, attractive graphs and beautifully coloured pie charts, and at the end of the day all the techniques of modern selling were used to try to convince everyone that a great deal of thought had gone into it.

I should like to say a brief word to the noble Lord, Lord Boyd-Carpenter, whose speeches are always enjoyed by these Benches if only because they exercise our blood pressure frequently. I do not know why I missed his speech at the Conservative Party Conference in 1963. It may well have been for the reasons he gave, that other events rather pushed it off the front page. However, I can assure the noble Lord that far from this subject being well thought out and having been on the boil for a long time, what really brought the whole question of the Green Paper forward suddenly was the revaluation of Scottish property. The Scottish newspapers were full of it and absolute panic set in. It brought forth resignations from within Conservative Party from which it has still not recovered. I do not know what constitutes recovery in terms of Conservatism in Scotland but they have not come very close to it so far. However, that is what brought up this question.

As recently as late 1983, after lengthy studies, and even contrary to the firm promises frequently given by the Prime Minister and the Secretary of State for Scotland that the rating system would be reformed, the Scottish Office concluded that the current rating system was fundamentally sound. That was as late as November 1983. However, because of what happened with the revaluation, the Government decided that something had to be done and they lighted on the idea of a community charge. No attempt to disguise this idea by clever words can get rid of the fact that it is really a poll tax that the Government are introducing. It will be based on a head count. Every individual over 18 will pay a fixed sum irrespective of income or circumstances.

A poll tax was looked at in some detail by the Government in 1983, and a Scottish Minister said in reply to a debate that there was little point in replacing rates with an untried and unfamiliar system having little support from the outset. The idea we have now been burdened with is that of the community charge, which was rejected way back in 1983 and frequently before that.

The Government have claimed in their introduction that many people other than the wealthy will benefit from the community charge. There is an article today in the Glasgow Herald by the present Secretary of State dealing with local income tax which is worth while reading, because he is using almost exactly the same arguments to say how unpopular and unfair local income tax would be as were being used by his predecessor two years ago on the idea of the community charge.

With such a variety of people living in so many different circumstances and in so many different types of houses with different valuations, many people may benefit, but at the end of the day the poorest will pay a great deal more than the others. I myself—and I am far from wealthy—would benefit by a tax, but, by and large, those living in the rich suburbs will do very well and those living in deprived inner-city areas and in large housing schemes will be badly hit.

A study in Edinburgh showed that an average family in a council estate called Sighthill would face paying an average £230 more than the household is paying now under the existing system, but an average family in a good residential suburb of Edinburgh such as Colinton would pay £1,060 less. These examples may be extreme, but there are a great many examples, with which I will not weary the House, from one or two of the constituencies of Glasgow that happen to have two ends to them where the difference is also very great. These may be rather extreme cases, but they show what can happen when the community charge is introduced.

No defence of the proposals is possible in terms of social justice, as has been stated by many people already, but this Government have tried to convince everyone that they are concerned with cutting unnecessary costs and are looking for business efficiency. I can think of few things that in administrative terms could be less efficient than the system the Government have chosen. It will be an absolutely bureaucratic and administrative nightmare.

As was said by the noble Lord who has just finished speaking, a new register of residents will need to be compiled, separate from the electoral roll, because we have been told clearly that these two rolls will be kept separate and there will be no connection between them, and so it will not be considered a poll tax. The accuracy of this register will be open to challenge if, as I assume, it will be public, and additions and subtractions will need to be made on an on-going basis as people move about the country, using the services in different rating areas.

Costs will be considerable. If this system comes in, it is reckoned in Scotland that something like 20 per cent. more people will be added to the housing benefit lists, which will mean even more complications and more problems for the local authority administrators. There are other problems. Many young people will be tempted not to register in case there is a comparison between the voters' roll and the community register. This will lead to even greater alienation of young people and will actively discourage them from registering. If they do not go on one register they may well try to get out of going on the electoral register or may be afraid to go and register on the electoral register.

How will the sytem deal with students in residence, second home owners, service personnel and casual flat dwellers? I represented a constituency in another place for 20 years which had a rapidly changing electoral register because of the changes in flat occupancy. How a register as unreliable as that will be used to levy a tax is beyond me. The permutations are almost immeasurable, and all in the name of efficiency and fairness, according to the Government.

The Government's favourite example is that of the single pensioner with an income of less than £50 per week. The advantage of the poll tax, it is claimed, is that rather than paying a large rate bill on a small income the pensioner will pay a more reasonable poll tax of around £250 per year. That is what has been calculated for some of the industrial areas of Scotland; but the Government know how false this argument is. That pensioner on a basic pension would have supplementary benefit and pay no rates at all because of housing benefit at 100 per cent. Under Fowler he would still be paying 20 per cent. of whatever local tax is levied. Of course, 20 per cent of £250, as the Government say in some of the statements we have had from the Scottish Office, could be less than the rates bill, but 20 per cent. of £250 is about £1 per week, which for a pensioner paying nothing at all means £1 per week less for food, clothing and heating.

The difficulties in the areas that the noble Lord, Lord Boyd-Carpenter, referred to and the question of people or businesses going to them, believe me, are not due just to labour problems but to historic problems. We can go into the whole question of why the labour problems are difficult at some other time. But it is not just that; it is because Britain's wealth was built in these areas. It was built on the Clyde, on Merseyside, in the Lancashire cotton mills and in the Welsh valleys; but it has all drifted south.

As the honourable Member for Henley said in a speech recently, the money has all drifted south and left dereliction in so many parts of the country. If the noble Lord, Lord Boyd-Carpenter, would like to come up to Glasgow, I should be delighted to take him round the city, where we have been pulling ourselves up by our bootstraps, despite the great cuts we have had from the Government. Glasgow is now a city that is really showing what can be done by good, responsible local government, dealing with appalling problems; but we still have appalling problems.

The rating system is not the problem. Many improvements could be made in it, and I hope that we will continually look for improvement and polish it and make it a better system than it is now; but that is not really the problem. The main reason for the difficulties, as has already been said by my noble friend Lady David in her speech, is that the Government have been continuously reducing the amount of money going towards making a better society in other parts of the country. For instance, if the level of grant had been maintained in Scotland at the 1980–81 level, an extra £1.7 billion would be payable in Scotland. That means that if we had all that money one year we could do without levying rates for an entire year; we could have a holiday from rates.

The noble Lord, Lord Winstanley, talked about the things we could do to improve rating, and suggested looking at things like land values. I am not going to get involved in a land values argument here, but I can assure the noble Lord, Lord Boyd-Carpenter, that from the example we had in the Salmon Bill we should have a very full House if we started discussing land values here!

We are not complacent, we are not satisfied with the way rating works, but, as a great Parliamentarian said about democracy, it is a terrible system until you begin really closely to examine the other ones that are on offer.

5.40 p.m.

Baroness Gardner of Parkes

My Lords, I should like to thank my noble friend Lord Marshall for bringing this debate to us today. It is a most interesting subject and one to which we have to apply a great deal of thought. I do not believe that the Green Paper covers many of the problems that would arise if the change was implemeted. Rates are unpopular. We are constantly seeking some way of changing them.

Rates are unpopular because we have to pay them. We can easily feel aggrieved by the thought that our money is being taken from us and spent in a manner that we would not perhaps wish to see. In the past five years, people have become outraged by the gigantic annual rate increases. They have also been distressed and fearful for the future of their businesses. They have been anxious about possibly being unable to meet ever-increasing demands in their own domestic rates.

The rate-capping legislation was a life-saver for many people as it set limits above which legal demands for rates could not be made. It is ironical that the limit set for the GLC's expenditure in its final year was claimed to be too low by the controlling socialists—so low that they would never be able to manage. Yet the budget, when eventually agreed after all those tortuous days last year, was actually set at a level below rate-capping level. And now we find, at the end of the council's term of office, a spare £76 million which shows that even the rate-capped level was far too high.

This was, of course, money taken from London ratepayers and taken, I consider, under false pretences when that amount of surplus is left at the end. As your Lordships will know, the legal battles are still continuing. Yesterday, the decision was made that the £40 million could not be given to the Inner London Education Authority. And from the comment made by the noble Baroness, Lady David, today, it sounds as if a decision has been made about the remaining £36 million. I have not, however heard the ruling.

The surplus was a very small part of what has been thrown away over the past five years. There has been some wise spending but also much wastage of the £9 billion spent by the authority in that time. Yesterday, at the last business meeting of the council, a paper, Working for London, the Final Five Years, a glossy and attractive looking book, was rejected on a vote by the majority of the council. Since 1980–81, the increase in the average rate in inner London has been 101.8 per cent. and in outer London over 86 per cent. It is interesting to see how unfavourably the Inner London Education Authority precept has affected the ratepayers of inner London. The saddest aspect is that the highest education spender is producing the worst education in the country. However, enough of the GLC! That chapter of history closes next week and my membership finishes on Monday night.

Our concern today is to consider a fairer system of paying for local government. I do not find that the proposals in the Green Paper are fairer. Much modification is needed. I consider the suggestions impractical and expensive to implement. There would have to be compiled a register of all resident adults—a separate register, I would emphasise, from the electoral roll. The noble Baroness, Lady David, said that it was a poll tax. It is not a poll tax—a point that I believe has been made clear previously. There are to be two registers, one for the electors and the other for those who will be paying the community charge. But the point made by the noble Lord, Lord Carmichael, is a very sound one. There are people who might deliberately keep themselves off the electoral register because of fears of cross-checking with the community charge. It would therefore have some degree of impact on the electoral register.

It has also to be appreciated that the electoral register in many boroughs is quite hopelessly inefficiently kept now. It is such an expensive business and so difficult to follow up the rapid changes in a very mobile borough that the electoral register becomes out of date very quickly. Only too often, when canvassing on the doorstep, I have been told that someone has died or has left that address perhaps as long ago as a year or two years. This is not for lack of the local authority sending round a man with a form to check. It is simply that there is never anyone at home.

If no one is there, how do you discover the identity of the residents? One can deliver form after form, but if none is returned one never obtains the information. A local council will be involved in endless argument over the dates when people lived in a property. It is made clear that if you live there for only part of the year, you pay only for that part. Equally, if you live somewhere else for part of the year, you would pay only for that part. Again, there would be difficulties with students who are not there at term time. All this seems very vague and difficult. It would be relatively easy to avoid registration and almost impossible to prove how many adults lived in one house.

I can think of a special problem locally, here in Westminster. There will be cases of a 20-room house in foreign ownership where full rates are now paid. Under the new system, the charge for that house would be twice the flat rate of the community charge; that is, equivalent to two adults in residence. Yet there are times when these houses may have 20 or more people in them. It would be most unfair for a two-person charge to apply to such a dwelling. Even if the houses are only occupied for short periods of the year, the council has to maintain footpaths, lighting and amenities and possibly the roads on a full-year basis. The present rating system is much fairer in this type of case. Although central London has a disproportionately large number of foreign owners, this is not a problem that is exclusive to London. People are buying large and valuable properties outside London, and other areas will be affected by this situation.

I have been fortunate enough, with this debate taking place today, to be sent someone's little rate statement. It arrived today. It is not mine. I wish that it was, because it is slightly less expensive than mine. It was sent to a Westminster ratepayer, and it states: The Rates Act 1984 requires the serving of this notice which informs you of the amount of General Rate attributable to the property shown below". This is a two-bedroom house, hard on a railway line. Underground trains roar past every few minutes, although the noise ceases in the middle of the night. It is not what one would call a most peaceful and tranquil setting.

However, the rateable value of that little house is £947 and the rate payable is £1,283. There is a breakdown showing how the rate is made up. The city of Westminster itself takes £243. The other precepts range from that of the London Residuary Body, which is only £3.98, to the highest for the Inner London Education Authority, amounting to £731. The police precept, I may add, is £140, so it is not the highest. London rate equalisation accounts for £237. All the precepts add up to just a few pence below £1,300. The actual Westminster part is £243, which is almost offset by domestic rate relief. We are therefore comparing amounts of £1,500, £1,300 and £243. The total amount is £1,542 from which the domestic rate relief is deducted.

I cannot see anything that is clear about precepts in the Green Paper. Are all precepts going to be abolished? Will the community charge replace all precepts? What exactly is the community charge replacing? It is a quite significant factor for any ratepayer who receives a rate demand and sees that the local council has control over only £243 out off £1,283. This needs to be spelt out. My noble friend Lady Faithfull made the point that people did not know what they were paying for rent and what they were paying for rates. My noble friend is right. I must support her statement.

I know that the local council should notify people as to what part is rent and what part rates. Most of them do; but some do not. However, with regard to the person who is not paying he does not know. I fill up social security forms for people for dental treatment, and on the form it asks, "What do you pay for your rent? What do you pay for your rates?" They do not know. They have one figure—the amount which is due per week or month. They do not know what part of it is rates and what part is rent. The noble Baroness referred to millions of pounds of rent arrears. If you are one of the people who are not going to pay it does not matter whether you are not paying your rent or your rates; you are quite happy to be not paying the whole amount. You will not differentiate.

I therefore think that there has to be some way of making clear to people what proportion is being spent on local services and what proportion is rent. It may strengthen the hand of the tenants in both regards. They might find that they have the right to ask more questions about one or the other.

I am convinced that our Conservative Government care greatly about those who are unable to help themselves. I believe that there will always be provision made to help those in real need. I thank that the statement that we should like to see everyone pay 20 per cent. is a good statement even if that payment is made out of another Government pocket to help people pay the 20 per cent. There would be a different level of awareness with regard to local costs if people knew the use to which money was being put.

It is certainly an injustice that many local authorities—and I am talking about London in particular—have allowed millions of pounds to accrue in rent and rate arrears. For those local authority tenants no enforcement has been made with regard to rates. However, if someone down the street living in a tiny little owner-occupied house was failing to pay his rates, he would have distraint proceedings taken against him immediately. I think that the position in London has been very unfairly dealt with where arrears of these enormous amounts have been allowed to arise and nothing has been done about the rates.

In Westminster, the implications for the national business rate are very grave. I believe the same applies to the City of London. In the City of Westminster 86 per cent. of the rates raised are paid by the business ratepayer. The rateable value of properties in Westminster is much higher than the national average. Because of that the rate in the pound is much lower. If, under this Green Paper, a uniform rate in the pound was introduced, then the payments called for from Westminster business ratepayers would be very much higher. This would have a very severe effect on business. As I understand it, the proceeds of those extra high payments of non-domestic rates would be nationally re-distributed. There would therefore be massive sums leaving the City of Westminster to go to other parts. This would then have what is called a double-ratchet effect. It would leave the domestic ratepayers with a great shortfall of rate revenue, and in order to deal with domestic services there would have to be an increase on the domestic rate. There would be this double effect: a "hike-up" in the business rate, and a consequent "hike-up" in the domestic rate. That is something which must be considered very carefully. Westminster is one of the only parts of the country which receives no rate support grant and is therefore one of the only areas which is not affected by the current changes or volatility in the rate support grant referred to by my noble friend Lord Marshall.

In Westminster it has been assessed that if a family has two adults living in a house it may be worse off than at present. I have an excellent booklet published by the Chartered Institute of Public Finance and Accountancy. It has prepared an analysis and assessment of what it thinks would be the result in terms of current cost. It believes that a community charge in a rural area might be £90 a head but for inner London it would be £450 a head at present day rates. Two people paying £450 a head each would be considerably worse off, since the average domestic rate for the whole of the City of Westminster is £600 per dwelling. I believe that that would be the opposite of an improvement for the residents.

There were a few points made by other speakers which I felt I had to take up. One was a point made by my noble friend Lord Marshall. He was saying how flawed the present rateable value is. I know in Islington in the Barnsbury area, where there are streets of houses which have been improved and done up, that there are gross inequalities now in the rateable values. If one has done all one's work internally in the house and has made it into a little palace, it will not have been rerated. However, if one has done anything to the roof or window, or something which has called in the Inland Revenue valuation officer, he will then have applied for rerating and the rates will have increased considerably. This has created an unfair situation.

Present rateable values are based on the notional rental value of 1973. There are again areas which I know well where older properties have much lower rateable value than newer properties. This was because in 1973 a period property was not as attractive as it is today. However, today such a period home is much more valuable and attractive than the one which was perhaps new in the 1960s, was classified as new and was expensively rated in the 1973 valuation. But positions change, and the rating valuation is so out of date that it is quite wrong at the present time.

I have only a few more points to make. I am sure that everyone will be pleased to hear that because there is nothing worse than speaking for too long at this time of day. I was very disturbed to hear the comments of the noble Lord, Lord Dean of Beswick, about the sad situation in Manchester. I was disturbed because I think that the situation in Manchester is just London in a worse form. I believe that it is the Socialist control in Manchester which has done so much damage.

Lord Dean of Beswick

My Lords, No.

Baroness Gardner of Parkes

My Lords, I can see that the noble Lord is going to protest about this.

Lord Dean of Beswick

My Lords, since the noble Baroness refers to my speech and the situation in Manchester, I am sorry but I have to rise. Let me briefly put forward the point I made a few weeks ago. I do not necessarily agree with all that the present political leaders in Manchester are doing. But I have to say that if I, with a more moderate approach, had still been in control in Manchester, the problem would have been of the same dimensions. It has nothing to do with the fact that Manchester has mismanaged money. It has had £400 million withheld; £60 million-odd a year.

Baroness Gardner of Parkes

My Lords, I thank the noble Lord for that comment. However, I do not agree with it because whenever one talks about what is being held or withheld one ignores any penalties or a ratecapping situation that exists. One has only to listen to the noble Lord, Lord Carmichael. The noble Lord has told us that Glasgow—with I believe an equally bad situation—is doing something about that.

I have only to look at Tower Hamlets to see how they have managed to develop their rate base—an area which a few years ago we thought had no hope—and to realise that there is hope in these situations and ways of improving them. The message that I have had from people in the North West is that businesses have been driven out of Manchester in the way that businesses were driven out of the Greater London area. We have to be very clear that the rates are highly relevant to business and to the future of the cities themselves.

If one looks at the New York situation a few years ago it was in a bankrupt position. However, all kinds of plans have been developed and it has become highly successful again. Property has been improved. People have come back into New York City itself, into Manhattan. I believe that it could happen in Manchester but one has to have the will to see those changes take place.

Urban aid exists, but I shall not go into it because it is yet another matter. I return to the rate issue as raised by the Green Paper. I believe that the community charge will be impractical and will be very expensive to administer. Moreover, the cost will fall on the local authority instead of national Government. I do not believe that the position will be fairer. I thought that the comments of the noble Lord, Lord Ellenborough, were very interesting, although I should prefer to see a revaluation. Incidentally, the Green Paper makes clear that there must be a revaluation by 1990 of all non-domestic property, so obviously revaluation is already under way. However, if we cannot have an upgrading and an improvement of the present system, I would tend to favour the noble Lord's suggestion of income tax on a local basis.

I am not happy with the Green Paper as it stands. However, I thank the noble Lord, Lord Marshall, for giving us the opportunity to discuss the matter.

6 p.m.

Lord Underhill

My Lords, I, along with other noble Lords, wish to thank the noble Lord, Lord Marshall of Leeds, for giving us the chance to debate the important question of rates. Although he said that his Motion was not aimed at the Green Paper, it was a jolly good aim because I failed to see how a great deal of what the noble Lord said was not directed at the Green Paper.

We are all affected by the rates burden. I received my rates demand yesterday. The noble Lord referred to Essex, where there has been an increase of 18.8 per cent. in the county rate. It is said that the increase is due to the loss of grant which has been transferred to urban areas, and that Essex has lost £21 million. A document I have says: In addition, the Government has not met its share of inflation which will have in effect reduced the grant by another 10 million". The document from which I have just read was issued not by a Labour county council, and nor was it issued by a Labour district council. I am grateful for all the information contained in the document, which I received last night, on the county rate, the precept rate and the district council rate.

One matter in the Green Paper with which we can agree is the Foreword. The third paragraph says: the main role of local government is to provide services in a way which properly reflects differences in local circumstances and local choice". I was so pleased that the noble Lord, Lord Marshall, indicated that so far as he was concerned he wanted to see local government as such and not local administration of centrally-decided services.

To my mind a great deal of the Green Paper suggests uniformity and centralism which have been our criticism of local government measures introduced by this Government over the past few years. I shall have to read very carefully in Hansard tomorrow what the noble Lord, Lord Boyd-Carpenter, said. However, it seemed to me that not only was he criticising a few extremist authorities, but he did not seem to have a very good view of local government as a whole. However, I shall read Hansard tomorrow to see whether my view of his speech is correct.

The noble Lord, Lord Marshall, seemed to suggest that one of our aims and needs is to reduce the amount paid from central government. Of course there has to be a limitation on local government expenditure; all governments recognise that to be so. However, why do we have central government grants at all? Surely it is to get some measure of equality or equalisation and to transfer social developments and responsibilities to local government. In fact, those points are made quite admirably in chapter 4 of the Green Paper and they can be checked by any noble Lord who wishes to look at them. If noble Lords look at paragraphs 4.5 to 4.10 they will see that the reasons for central government grant are the very matters to which I have just referred.

At the risk of boring noble Lords, I must again remind the House about what has happened with the block grant. Let us remember that in 1979–80 it was 61 per cent. In 1985–86 it dropped to 48.7 per cent. In 1986–87 the drop will be to 46.4 per cent. Since 1979–80 local councils have lost no less than £17 billion from national grant. It is no use people saying that local authorities can save that amount of money. Of course there are savings which can be made by all bodies, but a £17 billion drop in such a short period of time is a massive reduction.

The Government are now proposing two main elements in the grant system: a standard grant which will be based on per head of population; a needs grant which they say will be the assessed cost of providing a standard level of service. That worries my noble friends and me considerably, because if there has been one matter of criticism from all local authority associations it has been the GREA system of assessing the needs of individual authorities in order to get their local rate level. How will the decisions be taken in Whitehall—I refer to "Whitehall", although I really mean Marsham Street—on what should be the standard level of service, bearing in mind the point made by my noble friend Lord Dean of Beswick about the varying needs of one authority or another?

We are told in the "Summary and conclusions" of the Green Paper: This Green Paper sets out proposals for the most radical reform of local government finance in Great Britain this century". The noble Lord, Lord Boyd-Carpenter, chided my noble friend Lady David for being conservative and stolid. However, who was it who suggested that there ought to be a thorough reform of local government finance? My Lords, it was the Opposition. On 9th April 1984 we moved an amendment to the Motion for Second Reading of the Rates Bill. That amendment was vigorously opposed by the Government Benches and it was defeated.

However, the Government had previously issued two other documents. In December 1981 there was a Green Paper entitled: Alternatives to Domestic Rates. Indeed, it is mentioned in paragraph 3.7 of the present Green Paper. How much notice was taken of the results of the consultation on that particular Green Paper? Your Lordships must bear in mind that there have been criticism from Government Back Benches today of the present Green Paper.

In 1983 there was a White Paper which presumably was based on the consultations on the December 1981 Green Paper. That White Paper was entitled: "Rates—Proposals for rate limitation and reform of the rating system". I ask again: what notice was taken of the consultative period between 1981 and 1983?

Paragraph 2.15 of the 1983 White Paper refers to the overall conclusions on alternatives to rates. I wish to quote that paragraph in full because in the light of what my noble friend Lord Carmichael has said I think it is worthy of requoting. It states: The Government were fully prepared to propose to Parliament the abolition of domestic rates if consultation had revealed broad-based support for an alternative system of local taxation which satisfied the criteria. However, it was clear from the response to the Green Paper and from the evidence given to the Environment Committee that no consensus can be found for an alternative local tax to replace domestic rates". The concluding sentence said: The Government have concluded and announced to Parliament that rates should remain for the foreseeable future"— I repeat, "for the foreseeable future"— the main source of local revenue for local government". That was the position in 1983. The present Green Paper was issued, I believe, in December 1985. What has caused the Government to change their attitude? Is their change of attitude based on consultation with local government or is it based on consultation with the local authority associations? I can assure your Lordships the answer to that is quite definitely no.

On one matter I shall congratulate the Secretary of State, and that is that he has extended the period for consultation from 31st July to 31st October. But I must ask again how much notice will the Government take of consultations made during that period? I must ask this because we had consultation on the abolition Bill. How much notice was taken? Almost every person was opposed in the period of consultation to the Transport Bill. How much notice was taken by the Government? I hear my noble friend say, "None".

Therefore, while we have this period of consultation, will the Government take heed of what is said by local government and by the local authority associations, bearing in mind that their own Back-Benchers today have given serious criticism of many points in the Government's White Paper?

The Green Paper says that local government finance is at a crossroads. Every one of us will agree with that. But we heard from the noble Lord, Lord Boyd-Carpenter, frankly what we expected. I think he recognises that we expected it. It was a flesh-creeping account of the misdeeds of a certain number of authorities, which I make no attempt to necessarily justify.

Paragraph 1.29 of the Green Paper says: The modest success in holding back spending has been accompanied by a worsening of the relationship between central government and even the moderate and responsible local authorities. That is something we have been trying to say month after month; the breaking down of relationships between central and local government. The paragraph continues: Councils which had a long tradition of careful husbandry and efficiently-provided services found it increasingly painful to make savings from a low base. That is not what the Opposition is saying, that is what the Green Paper says in paragraph 1.29.

Although the 1981 Green Paper stressed that its scope did not extend to alternatives to non-domestic rates, it talked of a national non-domestic rate poundage back in 1981. It was in the Government's mind then, and that is what is now being proposed. Something that that Green Paper acknowledged—and it is mentioned in Chapter 10 of the 1981 Green Paper, but this has not been mentioned by many noble Lords—is that industry and commerce benefit from local services, and often substantially. That must not be forgotten.

My noble friend Lady David referred to the sections in the present Green Paper on the question of business rates. The noble Lord, Lord Marshall, said that many firms may have moved away because of the effect of those rates. This was echoed by the noble Lord, Lord Boyd-Carpenter. My noble friend referred to the study commissioned by the Department of the Environment. Paragraph 2.9 in the Green Paper starts with the words: Hard evidence of the effects on business is scarce. Paragraph 2.10 says: How far business rate increases do affect the location and viability of businesses in particular areas must therefore still to a large degree be a matter of conjecture. For most firms, the burden of rates is not so significant that a change in its level would be likely to have a major impact on location decisions. That is not what the Opposition is saying from the Dispatch Box, it is what the Green Paper is saying, and yet despite that we have the proposals for the national non-domestic poundage.

We also must not overlook that the Rates Act 1984 introduced a new requirement for local authorities to consult with non-domestic ratepayers. The Green Paper recognises that a problem can arise, because if you take away the question of local non-domestic rates from the local authority and you have a national poundage, then that problem of consultation locally with business interests is in some difficulty.

It is suggested in the Green Paper that a way to get over this might be if local authorities were allowed to levy, say, 5 per cent. above the national non-domestic rate poundage to spend on local services. I wonder whether that is put forward seriously as an encouragement for local authorities to carry out the obligation to discuss with business concerns.

The Green Paper suggests that the proposed changes would affect both businesses and local councils according to their level of local spending. Again my noble friend Lady David referred to the comments of CIPFA—which, as we all know, is the Chartered Institute of Public Finance and Accountancy—who incidentally have issued an excellent guide (not a critique) of the Green Paper, telling us exactly what the proposals really are.

CIPFA have produced an analysis of what the national poundage on a non-domestic rate will mean for all the authorities. I hope that the Government will study it. We have heard from the noble Baroness, Lady Gardner of Parkes, what it means to Westminster, and the effects are going to be considerable. In some areas where the present business rate is below the national poundage local authorities are going to gain; but businesses in those areas will have to pay considerably more than at present.

Where the non-domestic rate is higher than what will be the uniform poundage, businesses will pay less. They will be very happy. But in some areas, looking at these figures, it could lead to a complete crisis in local authority financing. I hope that the Government will not only take note of the criticism but will look carefully at CIPFA's analysis of every single authority in the country as to the effect of the national poundage.

It is true that the present Green Paper does not refer to a poll tax; it refers only to a community charge. But the Green Paper of 1981 referred to a poll tax. It said that it had not operated in Britain for centuries, and it had never been considered in previous considerations of possible rating reforms. The 1981 Green Paper was very critical of such a tax unless it was used to supplement another one. The Green Paper said back in 1981 that it imposes the same local tax burden on everyone irrespective of the ability to pay. When referring to a poll tax it has been suggested that we are relating this to election polling, but a quick reference to the dictionary suggests that a poll tax means a tax per head, and that is what the Government are proposing.

The 1981 Green Paper said in paragraph 13.20 that a poll tax: would impose a higher relative tax burden than domestic rates on households with lower incomes, and a lower relative burden on those with higher incomes". It went on: … low income households would lose heavily". That is now repeated in Annex C of the present Green Paper.

I should like the Government to justify how they believe that a poll tax, a community charge, call it what you will, will be a fair tax. I hope they will listen to the criticisms of their own supporters.

Reference has been made to the evasion and mobility difficulties. That was mentioned in the 1981 Green Paper, but apparently no notice was taken of the criticism. The 1983 White Paper said in paragraph 5.2: The Government have concluded that a levy on earners would not be cost effective to administer and collect, and suggested that such an opinion would not relate to ability to pay". What has happened in the period of two and a half to three years for that viewpoint to be changed from the Government's White Paper to what we now have in the current Green Paper?

Noble Lords have referred to the position which was clearly outlined in the White Paper and also in the social security proposals that everyone would have to pay at least 20 per cent. of the local tax bill. The suggestion is made that if necessary financial help would be given to meet the remaining 80 per cent. But we are not just dealing with earners. The unemployed will have to pay the full community charge. But the social security system will meet the other 80 per cent. That is how I read the Green Paper. If I am wrong I hope that the noble Lord, Lord Elton, will correct me. Students will pay the charge where they are normally resident in term time. Housewives with no individual income will be served with a community charge notice.

How can all this be justified? We are told that there will be a separate register. Noble Lords will give me the credit of knowing a little about the compilation of the ordinary electoral register and the number of visits I have made to Home Office committees complaining about the inadequacy of and the errors in our present electoral register. How will we compile an accurate separate register for community charge or poll tax purposes? This is a bit of slipshod thinking. One branch of the Government in the Home Office which finds it difficult to produce an effective electoral register might talk to the other branch if they are now suggesting that we shall have an accurate register for this poll tax.

My noble friend Lady David said that the Labour Party was considering these proposals and would also consider rating proposals, as we have been for some years. These are not things that should be jumped at quickly. I believe the Government have followed a line from 1981, 1983 and 1985 with little regard for what criticism there may have been of some of their suggestions. It is not based on ability to pay. I was interested in what the noble Lord, Lord Ellenborough, with his experience of local ratepayers' groups, said about the possibility of a local income tax and that whatever we do with the rating system regard must be had to the ability of persons to pay and to assist those who cannot do so. That should be the principle on which we should embark.

6.23 p.m.

The Minister of State, Department of the Environment (Lord Elton)

My Lords, I should like to join the distinguished queue of noble Lords waiting to thank my noble friend Lord Marshall of Leeds for providing your Lordships with a subject for debate which is of great interest and great importance, and, I may add, for starting our discussion of it with such a constructive analysis of the problems before us.

The terms of my noble friend's Motion call attention to the burden of rates and to the case for spreading this burden in a fairer and more equitable fashion. No one who has listened to this debate can doubt that rates are a burden or that they need to be more fairly distributed. That is something of which the Government have been increasingly aware for some considerable time. The present system is unfair, both between individual ratepayers and between individual local authorities. We have had evidence of that this afternoon. As a government, we have recognised that problem in our own Green Paper, to which many noble Lords have already referred and to which I shall return. But it is not the only problem. There are other things wrong with our system of local government finance besides the conspicuous way in which it favours some individuals and works against others. If we are to review the system and modernise it, we must look at them all.

The first oddity in our present arrangements, and the first problem that we have to consider, concerns not only unfairness in distributing the burden of rates but also unfairness in the electoral sense. On average 60 per cent. of the burden is carried by non-domestic ratepayers, so that for every extra £1 of local spending raised in rates the non-domestic sector has to find 60p. But in some authorities the proportion is higher still. In Camden, for example, business has to find 75p in every 100p of local spending. Camden business pays three-quarters of the costs of the decisions taken by Camden Borough Council but it does not get even one-quarter of a say in what those decisions should be; and those decisions affect it closely.

Nor is the burden of rates simply unfairly spread between the non-domestic and the domestic sectors. There are startling discrepancies, as my noble friend Lord Marshall of Leeds pointed out, within the non-domestic sector itself. In Newcastle, the rate is 347p in the £1; in Gillingham, it is 151p. Those enormous variations reflect the spending decisions of local councils on which the business ratepayer has no vote or sanction. If the enormous differences in the business rates resulted from the policies of businessmen, that might be fair. Having voted for a policy, they must expect to pay for it. But they have not, because they have no vote.

This is a case of taxation without representation. The taxation distorts competitiveness and it is passed on either as higher prices to the business community's customers or as lost investment and lost job opportunities to the local authority's citizens; or, most regrettably and most likely, as first the one and then the other. Those who ultimately meet these costs have no way of knowing how they have arisen. The business rate, which is subject to the control of individual local authorities, is therefore unfair both because it carries with it no voice in the election which affects that control and because the burdens vary for no reason that can be seen and understood by those who bear them.

That accounts for 60 per cent. of the rates, and I now turn to the other 40 per cent.—to the domestic rate. Here, there are anomalies which are very well known and strongly objected to. The noble Lord will hear what I shall suggest when I get to it. Everyone can recognise that it is unfair to charge a solitary retired widow the same amount as a working husband of a working wife. In my example, the widow lives next door to a working husband with a working wife with three working children—not the rather larger family that was referred to from the Liberal Benches. Nonetheless, she lives in an exactly similar house next door. That sort of unfairness we meet in every rateable area because rates are a tax on property and their cost to the invidual is set with no respect to the extent to which he used the services for which he is obliged to pay.

But that is an example only of unfairness between the individuals who pay rates. Another startling feature of the system is how few of them there are. Out of an electorate of 35 million, only about half are liable to pay rates. At present, 3 million of those, as my noble friend Lord Marshall of Leeds reminded us, have 100 per cent. rebates and another 3 million have partial rebates. Thus only one voter in three pays full rates directly. This means that while 100 per cent. of those entitled to vote in council elections enjoy the services the council provides, only about half of them have to contribute directly, if at all, to the local costs of those services. That makes the link between voting and paying for local services, on the one hand, and consuming them, on the other, too tenuous. Too many people have the incentive to vote for more services and higher spending. Too few have to think what the costs of so doing may be. The linkage of accountability has been broken.

When rates took their present form over 100 years ago, a property tax was appropriate. It was not chosen because property stood still long enough to be counted (as the noble Lord, Lord Winstanley, suggested) either then or in the reign of Good Queen Bess when the tax was invented. It was chosen because in those days most local services were provided for property. But ever since the 1930s, that aspect of local authorities' services has diminished. They have ceased to be responsible for trunk roads, for gas, for electricity, for water and for sewerage.

As their property-based duties have shrunk, their people-based responsibilities have grown, and now they cover the whole range from personal social services and education to housing the homeless. Today, most local services are directed at people and not at property, and it is inappropriate that local taxpayers' contribution to the cost of those services does not reflect that change.

Your Lordships may think that I have said enough already to show my support for the thrust of my noble friend's Motion. If I need to refer to a further defect of our present system it is that it is based on notional values and not real ones, and my noble friend's figures amply illustrated that. This is the source of endless arguments and, if they are to be fair, they need to be revalued regularly; and noble Lords have addressed that problem. But revaluations are wildly unpopular and I am sure that noble Lords from Scotland, which had a revaluation last year, can testify to that.

Either revaluations happen and cause much misery or they do not happen and the rates remain unfair. What we have now is a system which is not simply unfair; it is positively dangerous, because the linkage between votes and policies is broken at one vital point. Of all the anomalies that we now face, it is that one which not only enables but positively encourages councils to ignore the wishes of the people who provide much of the money that they spend about how they are going to spend it. There is a lack of accountability in the system which we cannot afford and, as we look at the cures offered for the other weaknesses which your Lordships have addressed, we must continually ask ourselves whether they will cure that one and whether they will make local government properly accountable. Let us bear that in mind as we look at the various proposals intended to make the system fairer.

We are all agreed that there is a clear case for spreading the burden of rates more fairly. Even noble Lords who have said that and said no more are convinced of it, although on what constitutes fairness there are very divided views, some of them a little odd. Let me start by asking what noble Lords opposite would introduce as a fairer system. The noble Members of the Liberal Party and the Social Democratic Party propose a local income tax.

In a phrase so aptly picked up by my noble friend Lord Boyd-Carpenter that I need not repeat it, the noble Lord, Lord Winstanley, pointed out that this was something on which his Alliance parties were agreed. The noble Lord himself does not seem to be in quite that happy position, because he was able to argue both that local government should be freer to make its own decisions beyond those of mere administration and also, if I understood him aright, in the same speech to say that government should do more to hypothecate their grant, which is to say that they should do more to say on what the money should be spent. This seems to suggest that he does not agree with himself in respect of local accountability.

The party that the noble Lord speaks for thinks that it would be fairer because it would take into account ability to pay. This is the device of local income tax. So it may; but it does not exactly—and I must say this to my noble friend Lord Ellenborough—represent a great step forward in accountability. This is something which I find a fatal weakness. The position today is that 18 million people are now liable for domestic rates but 3 million of them are exempted under the rebate. After implementation of the proposals in the social security White Paper, every household will pay at least some rates and that brings the figure up to 18 million again. With the local income tax, the tax base, it is true, would be widened slightly to 20 million people, but some 5 million complete households (or about 15 million people) would still pay nothing at all towards local services unless, of course, those noble Lords are proposing to lower the tax threshold and bring half of our people into tax for the first time.

I congratulate the noble Lord, Lord Winstanley, and his noble friend on making speeches which made no reference to proportional representation; but if that is their proposal I think that even that device would not return them to power.

Lord Winstanley

My Lords, the noble Lord will acknowledge that I stated that this was not the time or place in which to put forward our proposals in detail. I said I was not proposing to do so. I referred to one aspect of our proposals and merely said it was one aspect. It happened to be an aspect of our proposals about which I personally had some anxieties. I explained those but I did not go into detail, and I do not think your Lordships would have wished me to do so, on the other aspects of our policy for financing local government.

Lord Elton

My Lords, I am grateful to the noble Lord for the intervention for two reasons. One is because I can congratulate him on his courage in concentrating on the aspect in which he had least confidence; it is something which is a good preparation for office. The other is that he has said that it is impossible in a speech of these dimensions to produce the whole case. Your Lordships will forgive me if I am in the same position also and will give the same answer if I am criticised at the end of my delivery.

I should mention the practical difficulties in what is proposed, because we would still need to equalise taxable capacity among authorities. As the noble Lord, Lord Dean of Beswick, made clear, the ability to equalise rateable values among authorities is essential and we should still be left with a grant system as complicated as it is today, shuffling large sums of money around the country in an arcane and obscure way, unless the noble Lord can think of a way out of it, as it were, in the Recess.

Lord Winstanley

My Lords, I explained and stated positively that I thought it was absolutely essential that large amounts of money should be shuffled about the country in the way to which the noble Lord has just referred. I said that it was absolutely essential that there should be an equalising measure; that that is central government money by means of grant. I explained that and I adhere to it.

Lord Elton

My Lords, we are of one accord, all three of us, the noble Lord, Lord Dean of Beswick, the noble Lord, Lord Winstanley, and I. We all agree on this. What I am trying to say—obviously in a more provocative manner than I intended, since it produced three interruptions from the noble Lord—was that this method seemed to result in a very complicated system; and complexity is something that we are trying to fight away from. If we do not do that, the only alternative would be to leave the inequalities in place and watch inner cities in gathering crisis, as high-income families moved to low-price suburbs. We are on common ground.

The changes to income tax itself would be something not to trifle with or shrug lightly aside. Just to finance existing rate bills, the range of increases would run from 2p to 11p in the pound. That, in the wake of last week's Budget, leaves the taxpaying public with no difficulty at all in distinguishing the taxation policies of our respective parties.

Let me say now that a further and fundamenal flaw in the present system is precisely that it leads, as that would, to a recipe for continuing conflict between central and local government. The present system has built into it the seeds of conflict between national and local government, and the basis of that conflict is simple. Local government is not responsible for national economic performance, but the volume of local government spending and borrowing is so great that it has a large influence upon that performance. The accountability of national government has been preserved through the ballot box. They are answerable to the electorate for the management of the economy. Local government is not similarly answerable through the ballot box. The interests of the two levels of government are bound to be in conflict even when it is not necessary for the Government to protect ratepayers from their councils by direct intervention.

The economic performance of central government depends to a substantial extent on expenditure and borrowing by local authorities. It is central government which the electorate judges on their performance in these matters, as is proved time and again from the Dispatch Box opposite. Your Lordships will gather that I do not think much of the proposals of the Alliance, skilfully though the noble Lord, Lord Winstanley, advanced them.

The noble Baroness, Lady David—and she was echoed in this by the noble Lord, Lord Underhill—having sternly upbraided us on taking far too long to come out with our proposals, says that her party is not yet decided; it is going to have a conference later and thinks this is a matter which should be dealt with without haste. I loved that passage, because I have so often been twitted by noble Lords opposite on our failure to come forward with proposals and our tardiness. Labour's proposals attract me, if anything, slightly less than those of the Liberal Party and the SDP. They would retain rates with all their unfairness but they would change the means of assessing them.

Lord Underhill

My Lords, the big difference is that nowhere in our election addresses have we said that we will abolish rates. We have asked for a complete review of local government finance.

Lord Elton

My Lords, it was a complete review of local government finance which led to our decision to abolish the rates. Your Lordships have already heard that the noble Lords propose to use a different system of assessing the rates. They would assess them on the basis of capital values. But capital values change—sometimes quite quickly—and that means regular revaluations to keep pace with the continual changes in the capital values. Your Lordships will already have heard of the disadvantages of revaluations from no less an authority than the noble Lord, Lord Underhill, himself. It is this that he proposes to rely upon.

Regular revaluation would cause turbulence and would make the Scottish revaluation look like a storm in a teacup. That is no guess. I invite your Lordships to look at what would have happened if we had been using that system all along. Average regional house prices show that a capital revaluation in 1979 would have made rateable values rise in the North and decrease in the South, in London. A revaluation five years later, in 1984, would have sent rates plummeting in the North and soaring in the South. And what connection would those movements have with the services provided and paid for or the quality of the decisions made by elected councils, or indeed with the ability of the ratepayers to pay their rates? My Lords, I will give way, but perhaps I may say that this is the last time I shall do it. I have been speaking for eighteen minutes and I think I have about three minutes' injury time clocked up already.

Lord Carmichael of Kelvingrove

My Lords, on the question of revaluation, I have never understood—and the noble Lord seemed to compound my confusion—why a sudden increase in valuation should drastically affect the rates as much as he seemed to suggest between the North and the South. Why should the total sum paid by any householder in rates increase as much as the value of the house in the South or decrease as much in the North as he seemed to suggest? It has always been a source of confusion to me, and the Minister has compounded it.

Lord Elton

My Lords, the complete answer to the noble Lord's question must be awaited until the eventual clarification of what the policy will be but, as I understand it, it is related to the capital value of the house in which the rated person lives; and that value goes up and down, according to the market, very sharply. I have described the way in which it has done so in the recent historic past. If in fact my mathematical deductions are wrong, I will await with great interest the results of the Labour Party Conference and the publication of their conclusions; and the noble Lord will be able to put me right if I have got it wrong.

I think perhaps this would be a convenient moment at to pick up one or two of the points that were made by my noble friend Lord Marshall of Leeds in opening. Your Lordships will recall that he referred at some length to the latest rate support grant settlement, and he was not alone in that. I think I ought to say that the settlement was based on a 3.4 per cent. increase in spending. That was determined in the context of an inflation forecast at that time of 4.5 per cent. That is the GDP deflator, and it therefore represents in real terms a cut of 1.1 per cent., which is necessary to the Government's efforts to control public spending. I have already described how the role of government affects relationships with local government in that respect.

Though a change in the actual outturn of inflation could well influence the impact of that decision, if local authorities decide to increase spending on pay increases above the central government's assumptions, for instance, that is a matter for the local authorities themselves and for their ratepayers. Local authorities collectively recently agreed to give their manual workes an 8.1 per cent. pay rise. That took them 3.6 per cent. above the predicted rate of inflation; but the Government had already made clear to local authorities that they did not intend to make any adjustments of rate support grant in 1985–86 or any allowance in the 1986–87 settlement for pay increases of that order.

That would be to get the taxpayer to pay a higher real cost for services that are down to local government and that result from local government decisions. Local authorities knew that ratepayers would have to pick up the bill when they agreed to the increase; and the same will apply to teachers' pay unless a specific pay and conditions package is agreed. I accept that the present system, and especially the grant system, obscures the impact of local authority spending decisions, but in these respects high rate increases are clearly not the result of the settlement but are the outcome of the local authorities' own decisions.

The noble Lord, Lord Underhill, quoted the rate rise in Essex. As background to the figure he gave, I should say that the proposed increase in spending by Essex County Council is not 3.4 per cent., which is the assumed rate for the settlement, nor yet 4.5 per cent., which is the assumed rate for inflation: it is 10.1 per cent. That is an increase in spend and not a reduction in grant. It is not for the national taxpayer to pick up that bill. The settlement was never intended to underwrite substantial increases in expenditure; nor should it.

Of course, I must agree with my noble friend that grant has moved from the non-metropolitan authorities to the cities, and especially London. As my right honourable friend explained in another place in the course of the debate on the settlement, we thought it right to recognise the acute problems of some of our towns and cities. The resources cannot be found anywhere other than from the ratepayer or the taxpayer. We also thought it right that the ratepayer should make a substantial contribution.

My noble friend compared the grant increases in London to the reductions in several shire counties. Again, I will not quarrel with his confident figures although, as my noble friend understands, the eventual outturn will depend on the spending positions on those and all other local authorities. That is important because the abolition of targets and holdback means that grants lost by overspenders will be recycled to all other authorities who are in receipt of grant. I should add that the London boroughs' grants are greatly affected by the abolition of the GLC.

Those large increases he cited result in part from those boroughs picking up spending responsibilities from the GLC and the grant to support them; and they do not have to spend the money in the same way if they do not want to. The reductions in Islington and Lambeth rates have at least some connection with the fact that those authorities have been rate capped by the Government.

As we are on the subject of rate support grant, I should reply to the specific question put by the noble Baroness, Lady David, about grant recycling. The source of the grant to be recycled is the underclaim of block grant by those authorities spending above the Government's assumptions. In previous years, this has gone back to the Treasury. This time it will go to all authorities; and so the answer to her first question is, yes. If the underclaim is less than £500 million when the authority's budget returns are received, the extra money would be found by the Government. That is the answer to her second question. The initial underclaim is over £600 million already, and therefore this looks unlikely. I should emphasise that the guarantee applies to budget returns and will be implemented in the summer.

The noble Baroness asked about next year. Consultation with local authorities has only just begun. It is too early to say what the shape of the settlement will be, but the overriding impression I have already formed is that all concerned, including the Government, are looking for stability.

My noble friend Lady Faithfull asked for separate billing, as did, I think, my noble friend Lord Boyd-Carpenter, of the different elements in a rate bill, between rate and rents. Our rates at 1984, as I think the noble Lord, Lord Graham of Edmonton (who is not here) recognised, ensured that each council householder receives a statement of rates paid once a year. But payments are made together, and we will look at the question raised by my noble friend. If I may, I will deal with her other points by correspondence because of the time.

I will now turn quickly to the proposals in the Green Paper. Our proposals differ from all those which have so far been put forward. The Government, as now, would continue to provide a considerable sub-stratum of finance on which the structure would rest. At the bottom would be standard grant, distributed so as to reduce local tax bills by an equal amount per adult in every area. On top of that would be the stratum of grant that varied from area to area, reflecting the different needs of each and equalising that need. The noble Lord, Lord Dean of Beswick, need not be frightened by what we propose; it is exactly what he wants. That is the vehicle for putting the money into the areas which the Government of the day believe need support.

The assessment would be done as now, but, I hope, in a less complex manner by assessing the cost implications of the number of school-age children in each area, the mileage of their road systems, and so on. That would leave all councils in a position where they could finance the same level of service for the same level of local tax or community charge. I draw the attention of the noble Baroness, Lady David, to that provision because as I listened to her comment on the effect of that on poor people in different areas it seemed that she was not fully aware of it.

The grant system to achieve that will be radically simplified. It will take account of variations in local authority needs. We intend to simplify the form of the needs assessments and, above all, to make them more stable from year to year so that large changes in grant which are so frustrating to local government are minimised. What we propose also cuts the link between grants and local spending decisions. That puts an end to the paraphernalia of grant schedules, multipliers, hold back, slow back, claw back and all the other necessary mumbo-jumbo of the present system to which the noble Baroness, quite rightly, takes exception.

The non-domestic or business sector would continue to provide substantial resources but its contribution would no longer be subject to the whims of local authorities over whom it has no influence, let alone control. It would be set nationally, once, and thereafter be pinned to the inflation index. Proceeds would be pooled and distributed as equal amounts per adult across the country. A small discretionary local rate could maintain the business link with the local community. The effect of those arrangements would be to leave only one slice of local government expenditure for financing from what was the rates and what we propose should be the community charge. That is the top slice. It is the slice which goes up and down according to what the local council decides.

The domestic burden also would be spread more fairly. Everyone would have a financial stake in his local authorities' spending decisions. Every adult in the household would receive a bill. I agree with my noble friend Lord Boyd-Carpenter that the bill should make clear to people who is levying the charges that they have to pay. Help will be given to those who need assistance to meet their payments, but everyone will contribute something and everyone will be able to make clear by voting what their choice is about the service provision and the level for which they are willing to pay.

Under our proposals, all electors would pay and, as a consequence, many more than now would. I am sure, vote to see that their money was properly used. That would restore democratic accountability to our system as well as fairness. It seems to me that the Green Paper is a profitable subject for your Lordships' study and, like the noble Lord, Lord Winstanley, I have not had time to go into the half of it. I thank my noble friend Lord Marshall of Leeds for giving us the opportunity for the first bite at the very large cherry.

Baroness David

My Lords, just before the noble Lord sits down, I asked a further question about what would happen to the £76 million that the GLC is not allowed to spend, but in the light of the time I should be happy if the noble Lord would write to me about it.

Lord Elton

My Lords, I also think that the matter is probably sub judice, but I shall write in any case.

6.52 p.m.

Lord Marshall of Leeds

My Lords, when I opened the debate I said that I had not aimed the Motion at the Green Paper and nor had I sought to exclude discussion on it. I said that I thought that it would get a good airing during the debate and I was not wrong. At least we in this House have had an early opportunity to discuss the Green Paper and express our views, and very diverse they were, as one might expect. I do not suppose that it will be the last time that we debate this subject in the House during the next six months.

Let me say how grateful I am to my noble friend the Minister for the way that he had replied to the debate. I hope that everyone who cares for local government is as concerned as I tried to show that I was about its future, because I fully, entirely and unreservedly agree with my noble friend who said the present position was dangerous for local government. I take the opportunity to thank all those who took part in the debate and, at the risk of being irrelevant, hope that they have a very enjoyable Easter Recess. I beg to leave to withdraw my Motion.

Motion for Papers, by leave, withdrawn.